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Kate and Jon Alden are 37 years old and have one son, age 5. Kate is the primary earner, making $87,000 per year. Jon does not currently work. The Aldens have decided to use the needs analysis method to calculate the value of a life insurance policy that would provide for Jon and their son in the event of Kate's death. Kate and Jon estimate that while their son is still living at home, monthly living expenses for Jon and their child will be about $3,700 (in current dollars). After their son leaves for college in 13 years, Jon will need a monthly income of $3,100 until he retires at age 65. The Aldens estimate Jon's living expenses after 65 will only be $2,700 a month. The life expectancy of a man Jon's age is 82 years, so the Alden family calculates that Jon will spend about 17 years in retirement. Using this information, complete the first portion of the needs analysis worksheet to estimate their total living expenses. Life Insurance Needs Analysis Worksheet Name of insured Step 1: Financial resources needed after death 1. Annual living expenses and other needs b. C. d. Jon and Kate Alden Monthly living expenses Net yearly income needed (1a x 12) Number of years in time period Total living needs per time period (1b x 1c) Period 1 $3,700 13 Period 2 15 Date Period 3 17 Total living expenses (add Line 1d for each period to check your total): July 31, 2015 $1,686,000

Kate and Jon Alden are 37 years old and have one son, age 5. Kate is the primary earner, making $87,000 per year. Jon does not currently work. The Aldens have decided to use the needs analysis method to calculate the value of a life insurance policy that would provide for Jon and their son in the event of Kate's death. Kate and Jon estimate that while their son is still living at home, monthly living expenses for Jon and their child will be about $3,700 (in current dollars). After their son leaves for college in 13 years, Jon will need a monthly income of $3,100 until he retires at age 65. The Aldens estimate Jon's living expenses after 65 will only be $2,700 a month. The life expectancy of a man Jon's age is 82 years, so the Alden family calculates that Jon will spend about 17 years in retirement. Using this information, complete the first portion of the needs analysis worksheet to estimate their total living expenses. Life Insurance Needs Analysis Worksheet Name of insured Step 1: Financial resources needed after death 1. Annual living expenses and other needs b. C. d. Jon and Kate Alden Monthly living expenses Net yearly income needed (1a x 12) Number of years in time period Total living needs per time period (1b x 1c) Period 1 $3,700 13 Period 2 15 Date Period 3 17 Total living expenses (add Line 1d for each period to check your total): July 31, 2015 $1,686,000

Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter16: Information, Risk, And Insurance
Section: Chapter Questions
Problem 10RQ: In an insurance system, would you expect each person to receive in benefits pretty much what they...
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CENGAGE MINDTAP Ch 08: Assignment - Insuring Your Life Kate and Jon Alden are 37 years old and have one son, age 5. Kate is the primary earner, making $87,000 per year. Jon does not currently work. The Aldens have decided to use the needs analysis method to calculate the value of a life insurance policy that would provide for Jon and their son in the event of Kate's death. Kate and Jon estimate that while their son is still living at home, monthly living expenses for Jon and their child will be about $3,700 (in current dollars). After their son leaves for college in 13 years, Jon will need a monthly income of $3,100 until he retires at age 65. The Aldens estimate Jon's living expenses after 65 will only be $2,700 a month. The life expectancy of a man Jon's age is 82 years, so the Alden family calculates that Jon will spend about 17 years in retirement. Using this information, complete the first portion of the needs analysis worksheet to estimate their total living expenses. Life Insurance Needs Analysis Worksheet Name of insured Step 1: Financial resources needed after death 1. Annual living expenses and other needs a. b. C. d. Jon and Kate Alden Monthly living expenses Net yearly income needed (1a x 12) Number of years in time period Total living needs per time period (1b x 1c) $ $ Period 1 $3,700 13 $ $ $ Period 2 15 $ $ $ Date Period 3 17 Total living expenses (add Line 1d for each period to check your total): July 31, 2015 $1,686,000 Q Search this course ? Khloe ✓ A-Z
Transcribed Image Text:CENGAGE MINDTAP Ch 08: Assignment - Insuring Your Life Kate and Jon Alden are 37 years old and have one son, age 5. Kate is the primary earner, making $87,000 per year. Jon does not currently work. The Aldens have decided to use the needs analysis method to calculate the value of a life insurance policy that would provide for Jon and their son in the event of Kate's death. Kate and Jon estimate that while their son is still living at home, monthly living expenses for Jon and their child will be about $3,700 (in current dollars). After their son leaves for college in 13 years, Jon will need a monthly income of $3,100 until he retires at age 65. The Aldens estimate Jon's living expenses after 65 will only be $2,700 a month. The life expectancy of a man Jon's age is 82 years, so the Alden family calculates that Jon will spend about 17 years in retirement. Using this information, complete the first portion of the needs analysis worksheet to estimate their total living expenses. Life Insurance Needs Analysis Worksheet Name of insured Step 1: Financial resources needed after death 1. Annual living expenses and other needs a. b. C. d. Jon and Kate Alden Monthly living expenses Net yearly income needed (1a x 12) Number of years in time period Total living needs per time period (1b x 1c) $ $ Period 1 $3,700 13 $ $ $ Period 2 15 $ $ $ Date Period 3 17 Total living expenses (add Line 1d for each period to check your total): July 31, 2015 $1,686,000 Q Search this course ? Khloe ✓ A-Z
CENGAGE MINDTAP Ch 08: Assignment - Insuring Your Life In addition to these monthly expenses, other future outlays must be accounted for. Before they had a child, Jon worked as a financial consultant, but his knowledge and skills are now somewhat outdated. Therefore, they include $30,000 for Jon to go back to school. Additionally, Kate and Jon want to create a college fund of $35,000 to fund their child's college education. They estimate that final expenses (funeral costs and estate taxes) will amount to $12,000. Finally, they have taken out a loan for home improvements of $130,000 and an automobile loan of $5,000. They own their home but still have an outstanding mortgage of $300,000. Using this information, complete the next portion of Step 1 to determine the total financial resources needed. 2. Special needs a. b. C. 3. 4. a. b. C. 5. Spouse's education fund Child's college fund Other needs Final expenses (funeral costs and estate taxes) Debt liquidation House mortgage Other loans Total debt (4a + 4b) Other financial needs Total financial resources needed (add right-hand column plus the Total Living Expenses you calculated): True $ False $ $0 $ $ $ $ $0 The second half of the needs analysis worksheet is not shown on this page. To complete the worksheet and determine the value of the life insurance policy the Aldens should purchase, they need to factor in additional information. $ True or False: The value of Kate's employer-offered life insurance policy should be accounted for in the remaining portion of the form. Q Search this course ? Khloe ✓ A-Z
Transcribed Image Text:CENGAGE MINDTAP Ch 08: Assignment - Insuring Your Life In addition to these monthly expenses, other future outlays must be accounted for. Before they had a child, Jon worked as a financial consultant, but his knowledge and skills are now somewhat outdated. Therefore, they include $30,000 for Jon to go back to school. Additionally, Kate and Jon want to create a college fund of $35,000 to fund their child's college education. They estimate that final expenses (funeral costs and estate taxes) will amount to $12,000. Finally, they have taken out a loan for home improvements of $130,000 and an automobile loan of $5,000. They own their home but still have an outstanding mortgage of $300,000. Using this information, complete the next portion of Step 1 to determine the total financial resources needed. 2. Special needs a. b. C. 3. 4. a. b. C. 5. Spouse's education fund Child's college fund Other needs Final expenses (funeral costs and estate taxes) Debt liquidation House mortgage Other loans Total debt (4a + 4b) Other financial needs Total financial resources needed (add right-hand column plus the Total Living Expenses you calculated): True $ False $ $0 $ $ $ $ $0 The second half of the needs analysis worksheet is not shown on this page. To complete the worksheet and determine the value of the life insurance policy the Aldens should purchase, they need to factor in additional information. $ True or False: The value of Kate's employer-offered life insurance policy should be accounted for in the remaining portion of the form. Q Search this course ? Khloe ✓ A-Z
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