Presented by Brian Leising This is the short-form life insurance needs analysis system I use with life insurance prospects and clients. The ten minute conversation achieves the same answers as an inch-thick comprehensive analysis, without the fancy full-color report. Here’s how it works: In part one, you were instructed to ask your client to take a piece of paper and draw a vertical line down the middle. The heading on the left should be FIXED EXPENSES (reviewed in the first article). The heading on the right should be ONGOING INCOME NEEDS. Ask your client if their fixed expenses were paid off, would they be able to maintain their standard of living on the remaining spouse’s income? If they hesitate or are unsure, suggest that when one spouse passes away, the remaining spouse and children will need roughly 70% of the former combined income to maintain their standard of living. Usually they will need some additional income. Let’s use that 70% number for the right column. Add the incomes of the couple and take that number times 70%. That’s the income they still need if one passes away. For example, if you had a couple with one spouse making $60,000 and the other making $40,000, one remaining spouse would still need $70,000 total. That translates to an additional income need of $10,000 if the $40,000 spouse dies, or $30,000 if the $60,000 spouse dies. How can we use life insurance to provide that income stream? I like to use easy math. Let’s say we need to generate $30,000 per year. A lump sum of $300,000 earning 10% interest would generate $30,000/year without reducing the principal ($30,000 times 10). A lump sum of $600,000 earning just 5% interest would do the same (half the interest rate, double the lump sum). You could split the difference if the client expects a rate of return in between, $450,000 at 7.5% interest. Use your judgment and ask your client what return they would reasonably expect to earn based on their past investing experience. Once you have the numbers from both columns, add them together to arrive at the amount of coverage your client just told you they need.