Paolo and Maria Rossi are 52 years old and have one daughter, age 14. Paolo is the primary earner, making $80,000 per year. Maria 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 Maria and their daughter in the event of Paolo’s death.
Paolo and Maria estimate that while their daughter is still living at home, monthly living expenses for Maria and their child will be about $3,300 (in current dollars). After their daughter leaves for college in 4 years, Maria will need a monthly income of $2,750 until she retires at age 65. The Rossis estimate Maria’s living expenses after 65 will only be $2,300 a month. The life expectancy of a woman Maria’s age is 87 years, so the Rossi family calculates that Maria will spend about 22 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 3
a. Monthly living expenses $3,300
$
$
b. Net yearly income needed (1a x 12)
$
$
$
c. Number of years in time period 4 9 22
d. Total living needs per time period (1b x 1c)
$
$
$
Total living expenses (add Line 1d for each period to check your total): $1,062,600