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1. Apply What You've Learned - Life Insurance Planning Scenario: You are 30 years old with a gross annual income of $55,000. You are married with 2-year-old twin children. Your spouse is 30 years of age, You estimate that your final expenses for Funeral, burial, and other expenses will be $15,000. You currently owe $185,000 on a mortgage, 25,000 on carloan, and $20,000 in credit card debt. You would like to replace your income for 30 years, and believe that your insurance proceeds can be Invested to earn a 5% return. You would also like a minimum of $60,000 for each child be placed in a college fund. You do not anticipate a need to fund a readjustment period for your spouse. You currently have a $80,000 whole life insurance policy Ch 12: Apply What You've Learned - Life Insurance Planning Current Social Security benefits are detailed in the following table. Remember, that survivor benefits are paid to surviving children younger than age 18, to a surviving spouse caring for surviving children younger than age 16, and to a surviving spouse aged 60 or older. $45,000 Benefit Present annual income Annual retirement benefit (at age 67 in today's dollars) Annual individual survivor benefit Maximum annual family benefit $35,000 $17,160 12,480 $20,400 14,760 36,120 $55,000 $22,800 17,040 $75,000 $27,240 19,920 30,960 40,800 46,560 The table of interest factors that can be used to compute the present value of an annuity is: Interest rate 3% Years 4% 5% 6% 7% 14 10.6350 9.9856 9.3936 8.8527 8.3577 15 11.9379 11.1184 10.3797 9.7122 9.1079 9.4466 16 11.6523 10.8378 12.5611 13.1661 10.1059 10.4773 17 12.1657 11.2741 9.7632 18 13.7535 12.6593 11.6896 10.8276 10.0591 20 14.8755 13.5903 12.4622 11.4699 10.5940 25 17.4131 15.6221 14.0939 12.7834 11.6536 30 19.6004 17.2920 15.3725 13.7648 12.4090 35 21.4872 18.6646 16.3742 14.4982 12.9477 Now use the data from your calculations above and that from your personal circumstances, to estimate the amount of life insuranc requires using the needs-based approach. If your answer is zero, enter "0" $ Final expense needs Income replacement needs Readjustment period needs Debt-repayment needs College expense needs Other special needs Total financial need $ Less: Total government benefits Less: Current Insurance assets Additional life insurance needed $ 1. Apply What You've Learned - Life Insurance Planning Scenario: You are 30 years old with a gross annual income of $55,000. You are married with 2-year-old twin children. Your spouse is 30 years of age, You estimate that your final expenses for Funeral, burial, and other expenses will be $15,000. You currently owe $185,000 on a mortgage, 25,000 on carloan, and $20,000 in credit card debt. You would like to replace your income for 30 years, and believe that your insurance proceeds can be Invested to earn a 5% return. You would also like a minimum of $60,000 for each child be placed in a college fund. You do not anticipate a need to fund a readjustment period for your spouse. You currently have a $80,000 whole life insurance policy Ch 12: Apply What You've Learned - Life Insurance Planning Current Social Security benefits are detailed in the following table. Remember, that survivor benefits are paid to surviving children younger than age 18, to a surviving spouse caring for surviving children younger than age 16, and to a surviving spouse aged 60 or older. $45,000 Benefit Present annual income Annual retirement benefit (at age 67 in today's dollars) Annual individual survivor benefit Maximum annual family benefit $35,000 $17,160 12,480 $20,400 14,760 36,120 $55,000 $22,800 17,040 $75,000 $27,240 19,920 30,960 40,800 46,560 The table of interest factors that can be used to compute the present value of an annuity is: Interest rate 3% Years 4% 5% 6% 7% 14 10.6350 9.9856 9.3936 8.8527 8.3577 15 11.9379 11.1184 10.3797 9.7122 9.1079 9.4466 16 11.6523 10.8378 12.5611 13.1661 10.1059 10.4773 17 12.1657 11.2741 9.7632 18 13.7535 12.6593 11.6896 10.8276 10.0591 20 14.8755 13.5903 12.4622 11.4699 10.5940 25 17.4131 15.6221 14.0939 12.7834 11.6536 30 19.6004 17.2920 15.3725 13.7648 12.4090 35 21.4872 18.6646 16.3742 14.4982 12.9477 Now use the data from your calculations above and that from your personal circumstances, to estimate the amount of life insuranc requires using the needs-based approach. If your answer is zero, enter "0" $ Final expense needs Income replacement needs Readjustment period needs Debt-repayment needs College expense needs Other special needs Total financial need $ Less: Total government benefits Less: Current Insurance assets Additional life insurance needed $

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