2. How much life insurance do you need? Calculating needs - Parti Maria and Paolo Rossi are 38 years old and have one son, age 9. Marta is the primary earner, making $140,000 per year. Paolo does not currently work. The Rossis have decided to use the needs analysis method to calculate the value of a life insurance policy that would provide for Paolo and their son in the event of Maria's death Maria and Paolo estimate that while their son is still living at home, monthly Wiving expenses for Paolo and their child will be about $4,000 (in current dollars). After their son leaves for college in 9 years, Paolo will need a monthly income of $3,300 until he retires at age 65. The Rossis estimate Paolo's living expenses after 65 will only be $2,900 a month. The life expectancy of a man Paolo's age in a2 years, so the Rossi family calculates that Paolo 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 Paolo and Maria Rossi Date July 31, 2015 Step 1: Financial resources needed after death 1. Annual living expenses and other needs Period 1 Period 2 Period $4,000 b $ C Monthly living expenses Net yearly income needed (1a x 12) Number of years in time period Total living needs per time period (10 x 10) 18 d S $1,736,400 Total living expenses (add Une 10 for each period to check your total) In addition to these monthly expenses, other future outlays must be accounted for. Before they had a child, Paolo worked as a mechanical engineer, but his knowledge and skills are now somewhat outdated. Therefore, they include $40,000 for Paolo to go back to school. Additionally, Maria and Paolo want to create a college fund of $60,000 to fund their child's college education. They estimate that final expenses (funeral costs and estate taxes) will amount to $18,000. 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 S 8 4 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 ( 446) Other financial needs Total financial resources needed (add right-hand column plus the Total Living Expenses you calculated) b C 5 $ $0 5