» Life Insurance Needs Analysis Worksheet

Life Insurance Needs Analysis Worksheet

LIFE INSURANCE NEEDS ANALYSIS WORKSHEET

(Basic worksheet to evaluate life insurance needs for dependents)

STEP ONE: CASH FLOW

MONTHLY INCOME:	Primary	Spouse

After-Tax Wages and Salaries:
Interest and Dividends:
Alimony and Child Support:
Business or Farm Income (not included in wages and salaries):
IRAs, Pensions, and Annuities Distributions:
Rental Income, Royalties, and Trust Income:
Social Security Benefits:
Unemployment Compensation:
Other Income:

1. TOTAL INCOME:

MONTHLY EXPENSES:	Primary	Spouse
(List expenses in both columns; do not include mortgages, debts, or educational expenses.)

Housing (Rental, Retirement Home, etc. – NOT Mortgage):
Utilities (Electric, Gas, Water):
Telephone, Television, and Internet:
Car (Insurance, gas, repairs & maintenance, new purchase):
Food (Groceries, Dining Out):
Insurance (Life, Health, Disability):
Home (Insurance, Property taxes):
Health Care (Prescriptions, Dr. co-pays, etc.):
Personal (Clothing, Hair, Cosmetics, etc.):
Entertainment (memberships, vacations, outings):
Remodeling and Home Furnishing:
Other:

2. TOTAL EXPENSES:

3. NET ANNUAL INCOME of Survivor: subtract (Total Income – Total Expenses) and multiple x 12: (Line # 1 – Line # 2) x 12:
Net Annual Income of Survivor shows the surplus or short fall that would exist after the death of the primarily head of household or their spouse. This assumes that the survivor would continue working at the same income until retirement. If you are a single parent, then put dependents (children) in spouse column; thus if children do not earn income from any sources, then the Net Annual Income of Survivors would equal (=) the Total expenses.

STEP TWO: NETWORTH

ASSETS:	Primary	Spouse
(List assets in both columns that would remain with or pass to surviving spouse/dependents)

Cash / Checking and Savings Accounts:
CDs and Money Market Accounts:
Stocks and Mutual Funds:
Annuities, Bonds, and Treasuries:
House (primary residence value):
Note: It may be possible to exclude up to a $ 250,000 (filing single) or $ 500,000 (filing jointly) gain on the sale of primarily residence; see IRS publication 523: Selling Your Home.
Other Real Estate:
IRAs, 401Ks, SEPs (all plans of primary and spouse/dependent):
Other Retirement Assets:
Business Assets/Interest:
Cash Value Life Insurance:
Trust / Inheritance:
Art / Coin / Stamp / etc. Collections:
Other Speculative Investments (commodities, futures, etc.):
Automobiles and other Vehicles (boats, etc.):
Other Assets:

4. TOTAL ASSETS:

LIABILITIES:
(List Liabilities in both columns that would be paid off for surviving spouse/dependents)
Primarily Residence Mortgage (or fund for new home):
Other Real Estate Mortgages:
Business Mortgages/Loans:
Business payments due; etc.:
Automobile and other Vehicle Loans:
Credit Card Balances:
Current Student Loans:
Other Installment Loans:
Unpaid Medical Bills:
Other Unpaid Personal Bills (alimony, child support, rent, utilities):
Taxes Owed:
Other Liabilities:

5. TOTAL LIABILITIES:

6. TOTAL NET WORTH: Total Assets minus Total Liabilities: (Line # 4 – Line # 5) = Line 6
Net Worth is the Wealth or Net Value of all Assets; the amount by which assets exceed liabilities.

STEP THREE: LIFE INSURANCE NEEDS ANALYSIS

Replacement for Loss of Income (use one only):

Primary

Spouse

7A. Simplistic Approach: Multiple total monthly income on line # 1 (both earners or single parent) by 70 % (.7) then x 12

7B. Income Needed for Survivor Approach:Enter Net Income # 3 if amount is negative. Example: If income is $ 20,000 a year and annual expenses are $ 50,000; the Net Annual Income in # 3 would be (– $ 30,000). Enter $ 30,000. If the amount in # 3 is positive, then enter 0.ENTER Primary in right column; and Spouse/dependent on left side.

Spouse

Primary

7C. REPLACEMENT INCOME: Multiple 7A or 7B by appropriate factor below:

Years until age 70; or number of years desired

Factor

8.8

12.4

15.4

18.1

20.4

22.4

24.1

Example: if Annual replacement income needed is $ 30,000 (not including the mortgage) and you are age 42 then use factor 20.4; thus $ 30,000 x 20.4 = $ 612,000.

Future Expenses and Gifts:

Primary

Spouse

Final (Funeral and Unpaid Medical) Expenses:(National average for funeral expenses in 2011 was about $ 8,000.)

Private School and/or College Tuitions:

The College Board’s Trends in College Pricing showed 2011-2012 average total costs (tuition, fees, room and board) were $17,131 for students attending 4-year public colleges and universities in-state and $29,657 out-of-state, and $38,589 for students at 4-year private colleges and universities. Not adjusted for textbooks, transportation, grants, and scholarships.

Factors for below; Years until College: 5 years = .95, 10 years = .91, 15 years = .86, 20 years = .82

Estimated 4 – Year Cost

FACTOR

Present Need

Child 1

Child 2

Example

Child age 8: $ 40,000 x .91 = $ 36,400

Retirement & Long-Term Care:

2011 National average cost of Assisted Living Facilities (ALF) was about $ 35,000 and about $ 78,000 for a Semi-Private Room in a Nursing Home (NH). (National Center for Assisted Living: 2010 only 19 % of residents had Medicaid funding). Average stay in ALF is about 3 years. Average NH stay is about 2.5 years. Does not account for long-term care insurance or Medicare supplements. FOR NEED: Multiple Line #2 (Total Monthly Expenses) x 12; then subtract $ 14,500 (average Social Security benefit); then x 15 for ages 70 to 85 of retirement needs; then add for ALF and NH stay. Example: {($ 3,000 monthly expenses x 12) – $ 14,500} x 15 + ($ 70,000 + $ 150,000) = $ 542,500.

Estate Taxes, Gifts (Family & Charity), Emergency Funds:

2012: Estate Tax Credit = $ 1,772,800; Estate Tax Exclusion = $ 5,120,000; Annual Gift Tax Exclusion per person = $ 13,000.

8. TOTAL FUTURE EXPENSES:

LIFE INSURANCE NEEDS:

Primary

Spouse

9. TOTAL NEEDS: Add 7C: Replacement Income + # 8: Total Future Expenses (Final Expenses + School Tuitions + Long-Term Care Needs) = Total Needs

Subtract # 6: Total Net Worth if assets > liabilities:

ADD # 6: Total Net Worth if assets < liabilities:

Subtract for existing life insurance policies:

ADD: Existing Home Mortgage balance

10. TOTAL LIFE INSURANCE NEEDS:

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Life Insurance Needs Analysis Worksheet