How much life insurance do you need? Calculating needs - Part1

Marissa and Nathan Azinian are 40 years old and have one daughter, age 10. Marissa is the primary earner, making $65,000 per year. Nathan does not currently work. The Azinians have decided to use the needs analysis method to calculate the value of a life insurance policy that would provide for Nathan and their daughter in the event of Marissas death.

Marissa and Nathan estimate that while their daughter is still living at home, monthly living expenses for Nathan and their child will be about $2,900 (in current dollars). After their daughter leaves for college in 8 years, Nathan will need a monthly income of $2,600 until he retires at age 65. The Azinians estimate Nathans living expenses after 65 will only be $2,000 a month. The life expectancy of a man Nathans age is 82 years, so the Azinian family calculates that Nathan 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	Nathan and Marissa Azinian			Date	July 31, 2015
Step 1: Financial resources needed after death
1. Annual living expenses and other needs
		Period 1	Period 2	Period 3
a.	Monthly living expenses	$2,900
b.	Net yearly income needed (1a x 12)
c.	Number of years in time period	8	17	17
d.	Total living needs per time period (1b x 1c)
				Total living expenses (add Line 1d for each period to check your total):	$1,216,800

In addition to these monthly expenses, other future outlays must be accounted for. Before they had a child, Nathan worked as a financial consultant, but his knowledge and skills are now somewhat outdated. Therefore, they include $20,000 for Nathan to go back to school. Additionally, Marissa and Nathan want to create a college fund of $25,000 to fund their childs college education. They estimate that final expenses (funeral costs and estate taxes) will amount to $10,000. Finally, they have taken out a loan for a business venture of $40,000 and an automobile loan of $3,000. Because the Azinians are renters, they have no outstanding mortgage.