CENGAGE MINDTAPCh 08: Assignment - Insuring Your LifeKate and Jon Alden are 37 years old and have one son, age 5. Kate is the primary earner, making $87,000 per year. Jon does not currently work. TheAldens have decided to use the needs analysis method to calculate the value of a life insurance policy that would provide for Jon and their son inthe event of Kate's death.Kate and Jon estimate that while their son is still living at home, monthly living expenses for Jon and their child will be about $3,700 (in currentdollars). After their son leaves for college in 13 years, Jon will need a monthly income of $3,100 until he retires at age 65. The Aldens estimate Jon'sliving expenses after 65 will only be $2,700 a month. The life expectancy of a man Jon's age is 82 years, so the Alden family calculates that Jon willspend 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 WorksheetName of insuredStep 1: Financialresources needed afterdeath1. Annual living expensesand other needsa.b.C.d.Jon and Kate AldenMonthly livingexpensesNet yearly incomeneeded (1a x 12)Number of years intime periodTotal living needs pertime period (1b x 1c)$$Period 1$3,70013$$$Period 215$$$DatePeriod 317Total living expenses (addLine 1d for each period tocheck your total):July 31,2015$1,686,000Q Search this course?Khloe ✓A-Z CENGAGE MINDTAPCh 08: Assignment - Insuring Your LifeIn addition to these monthly expenses, other future outlays must be accounted for. Before they had a child, Jon worked as a financial consultant, buthis knowledge and skills are now somewhat outdated. Therefore, they include $30,000 for Jon to go back to school. Additionally, Kate and Jon want tocreate a college fund of $35,000 to fund their child's college education. They estimate that final expenses (funeral costs and estate taxes) will amountto $12,000. Finally, they have taken out a loan for home improvements of $130,000 and an automobile loan of $5,000. They own their home but stillhave an outstanding mortgage of $300,000.Using this information, complete the next portion of Step 1 to determine the total financial resources needed.2. Special needsa.b.C.3.4.a.b.C.5.Spouse's education fundChild's college fundOther needsFinal expenses (funeral costs and estate taxes)Debt liquidationHouse mortgageOther loansTotal debt (4a + 4b)Other financial needsTotal financial resources needed (add right-hand column plus the Total Living Expensesyou calculated):True$False$$0$$$$$0The second half of the needs analysis worksheet is not shown on this page. To complete the worksheet and determine the value of the life insurancepolicy the Aldens should purchase, they need to factor in additional information.$True or False: The value of Kate's employer-offered life insurance policy should be accounted for in the remaining portion of the form.Q Search this course?Khloe ✓A-Z

Insurance is a risk management tool that provides financial protection to individuals and…

Kate and Jon Alden are 37 years old and have one son, age 5. Kate is the primary earner, making $87,000 per year. Jon does not currently work. The Aldens have decided to use the needs analysis method to calculate the value of a life insurance policy that would provide for Jon and their son in the event of Kate's death. Kate and Jon estimate that while their son is still living at home, monthly living expenses for Jon and their child will be about $3,700 (in current dollars). After their son leaves for college in 13 years, Jon will need a monthly income of $3,100 until he retires at age 65. The Aldens estimate Jon's living expenses after 65 will only be $2,700 a month. The life expectancy of a man Jon's age is 82 years, so the Alden family calculates that Jon 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 Step 1: Financial resources needed after death 1. Annual living expenses and other needs b. C. d. Jon and Kate Alden Monthly living expenses Net yearly income needed (1a x 12) Number of years in time period Total living needs per time period (1b x 1c) Period 1 $3,700 13 Period 2 15 Date Period 3 17 Total living expenses (add Line 1d for each period to check your total): July 31, 2015 $1,686,000

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC