Life Insurance Needs Worksheet

Current Cash Needs

A - Final Expenses
This includes probate costs, funeral expenses (funeral expenses may be $5,000 - $10,000) and medical costs for any bills your health policy does not cover (deductible plus any co-insurance).

B - Emergency Funds
Some Financial experts recommend that you have up to six months salary for any household or personal emergency that might arise. Your emergency fund can be larger or smaller, depending on your family's circumstances.

C - Mortgage Balance
It is a good idea to select a life insurance benefit large enough to pay off the existing mortgage balance.

D - Other Loans
List all your current outstanding debts (principal), such as auto loans, personal loans, credit card balances, etc.

E - Education - Estimated Current College Costs
Figure the future total college expenses for your children. On average, the current cost is $22,533 per year per child for a four year private school, and $10,458 per year per child for a four year in state public school (includes tuition, room, board, supply and transportaion costs).*

Current & Long Term Cash Needs

G - Required Monthly Income
To determine how much monthly income you need, take 70 percent of your annual take-home pay and divide it by 12 months.
Example: $30,000 x .70 / 12 = $1,750 of monthly income

H - Cash Reserve Factor
Divide the total monthly income you require by the appropriate factor listed below. You should select the factor that corresponds to the number of years you will need to provide monthly income for your family. Example: If you determine that your family needs $2,500 per month for the next 20 years, then: $2,500 / .004573 = $546,687. This is a time-value analysis to determine future cash needs assuming a 3 percent annual increase in inflation and a 4 percent return on the lump sum death benefit.

No. of Years Factor
10 0.008744
15 0.005964
20 0.004573
25 0.003747
30 0.003195

* Source: College Board Annual Survey of Colleges, 1999

The following worksheet can help you determine how much life insurance you may need. The letters to the left on the chart correspond with the explanations on the left under Current Cash Needs.

A Final Expenses
B Emergency Funds
C Mortgage Balance
D Other Loans
E Education - Estimated Current College Costs
F Total Current Cash Needs
G Required Monthly Income
H Cash Reserve Factor
I Total Cash Reserve Required
J Total Current & Long Term Cash Needs
K Cash and Savings
L Securities
M IRA, Keogh, 401(k) and Pension
N Life Insurance In Force
O Other Assets
P Total Assets
Q Total Life Insurance Needed

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