1 Assume that Ryan s gross annual income is 54 000 and
1. Assume that Ryan’s gross annual income is $54,000 and Alison’s is $64,000. Their insurance agent has given them a multiple earnings table showing that the earnings multiple to replace 75 percent of their lost earnings is 8.7 for Jacob and 7.4 for Alison. Use this approach to find the amount of life insurance each should have if they want to replace 75 percent of their lost earnings.
2. Use Worksheet 8.1 to find the additional insurance needed on both Ryan’s and Alison’s lives. (Because Ryan and Alison hold secure, well-paying jobs, both agree that they won’t need any additional help once the kids are grown; both also agree that they’ll have plenty of income from Social Security and company pension benefits to take care of themselves in retirement. Thus, when preparing the worksheet, assume “funding needs” of zero in Periods 2 and 3.)
3. Is there a difference in your answers to Questions 1 and 2? If so, why? Which number do you think is more indicative of the Nisbits’ life insurance needs? Using the amounts computed in Question 2 (employing the needs approach), what kind of life insurance policy would you recommend for Ryan? For Alison? Briefly explain your answers.

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