Life Insurance Needs: Family Needs Approach for PG&E Employees

'Brent Wolf from the Retirement Group, a division of Wealth Enhancement Group, advises PG&E workers to vigilantly assess their unique family needs. He emphasizes the value of an extensive life insurance analysis to confirm economic security, advising that innovative planning is essential to dealing with both long-term and immediate family requirements effectively.'

'Kevin Landis of the Retirement Group, part of Wealth Enhancement Group, encourages PG&E workers to make use of the Family Needs Approach like a dynamic instrument for financial planning. He highlights that knowing the comprehensive breakdown of future and immediate needs is able to result in a much more accurate life insurance coverage, tailored to really shield one's family's economic well-being.'

In this article, we will discuss:

1. The fundamentals of the household Needs Approach: Exploring what the household Needs Approach entails and also the reasons it is essential for PG&E personnel to learn it for good economic planning.

2. Immediate and Ongoing Financial Needs: Detailing the particular instant costs at death and also the constant cash flow requirements to allow for a surviving family member.

3.Evaluating and Applying the Family Needs Approach: How you can properly compute life insurance requirements making use of this technique, since both immediate and extended financial obligations.

What's The household Needs Approach? As a PG&E employee, it's crucial to understand The household Needs Approach to be able to better arrange your financial strategies. The household needs approach, likewise referred to as needs approach, the overall needs approach, and needs analysis, is a way of identifying the amount of life insurance coverage you need to bring under PG&E's policy. It's assumed the goal of life insurance is supporting the surviving family member's ongoing and immediate expenses adopting the insured family member's death. In comparison to the revenue replacement strategy, it prioritizes the monetary needs of surviving family with the insured's anticipated earnings. It involves identifying the quantity of cash needed to deal with your family's expenses in the event that the insured family member passes away. Under this particular technique, as a

PG&E employee, you divide your family's needs into 2 main categories:

Immediate monetary requirements at death
Continued family demands (net cash flow requirements)

Immediate Needs At Death
The primary needs at death need the accessibility of money to cover most or perhaps most of the following costs:
Final medical treatment expenses
Costs for funeral and also interment
Estate settlement expenses (such as probate costs, lawyer fees, estate and inheritance taxes)
Settlement expenses for credit card and other obligations
Emergency fund for unexpected expenses
Establishment of a fund for college tuition

Technical Note:

In the debts category are obligations such as credit card debt and also car loans. It can possibly include student loan repayment obligations. Additionally, several planners will have extended obligations (such as a mortgage) rather than mortgage payments during ongoing family requirements.

Constant Family Needs (Net Income Needs)
As a PG&E employee, you have to be mindful that continuing family needs (e.g., shelter, clothing, food, and transportation) necessitate a continuing money to deal with family costs related to different time periods up until the demise of the surviving partner.

These intervals include the following:

Readjustment period faster adhering to the demise of the insured.
Child Reliance Period
Blackout period (income needs of the surviving spouse after the kid dependency time and also until retirement)
Surviving spouse retirement period
The quantity of income which should be produced by the PG&E life insurance policy (i.e., the total cash flow) equals the dollar value of these needs minus the dollar amount of additional anticipated sources of income, such as:
Survivorship payments from Social Security
Spouse's wages
PG&E employee pension systems
This amount is discounted to its present value to help PG&E in identifying the lump sum necessary to produce the income. This info might be relevant for financial planning down the road.

Subtract Available Assets

After totaling the family's net and immediate cash flow requirements, you deduct the family's additional available assets which can offset several or even most of its needs.

Contained in these assets would be the following:

Bank accounts include, among others, checking accounts, savings accounts, and certificates of deposit.
Savings bonds
Real estate
PG&E sponsored IRAs, 401(k)s, pensions, along with profit sharing plans, among others.
Existing policies for individual life insurance
Financial assets (such as mutual funds, equities, along with bonds)
Consider stamp collections, coin collections, antiquities, works of art, along with other valuable belongings, when relevant in your situation.
As an AT&T employee, it's important you understand the way the difference represents your family's requirements that life insurance proceeds and succeeding investments should cover. As a PG&E employee, it's important you understand the way the difference represents your family's requirements that life insurance proceeds and succeeding investments should cover.

The General Equation
The basic formula for the household requirements technique is as follows:

Immediate needs at death in addition current value of ongoing family requirements minus anticipated available assets equals life insurance to meet family must have.
The simplified example provided below illustrates the equation:

Example(s): Mort and his wife, Vi, are estimating the quantity of life insurance to buy on Vi's life. They 1st estimate the next expenses to cover immediate needs at death:
Final medical expenses: $15,000
Funeral along with burial expenses: $7,500
Estate settlement costs: $30,000
Debts (including mortgage): $117,500
Emergency fund: $10,000
College education fund: zero
Total: $170,000

Example(s): They following estimate Mort's and also their 15-year-old daughter's ongoing overall income needs as follows (all figures here marked down to provide value for simplification):
Readjustment period (two years): $47,000
Dependency period (one year): $17,000
Blackout period (ten years): $102,000
Retirement period (fifteen years): $180,000
Total: $346,000

Example(s): Immediate needs + Present value of total income needs = $516,000

Example(s): Afterwards, they calculate different readily available assets which will be subtracted from this particular sum:
Bank accounts: $20,000
Money market accounts: $20,000
Investments: $120,000
Retirement assets: $50,000
Existing life insurance: $100,000
Total: $310,000

Example(s): The real difference of $206,000 ($516,000 - $310,000) equals their life insurance needs.

Determining Expenses

With the household needs approach, you must thoroughly assess your family's particular expenses and also fight the urge to go by basic guidelines which don't get your unique circumstances into account. As a PG&E employee, it's crucial you comprehend just how basic suggestions might lead to easier calculations, but might also lead you to miss specific family needs with considerable costs. So, you run the danger of underestimating the amount of life insurance coverage your PG&E policy should provide.
Immediate Needs At Death

As a PG&E employee, your family will need quick access to resources to cover the deceased family member's medical expenses, funeral along with burial expenses, estate settlement costs, and debt liquidation costs. Additionally, it's suggested that your family produce an emergency fund. This fund is able to help with unforeseen expenses that are particularly hard to manage during periods of emotional and financial strain. Additionally, lots of financial planners suggest including the construction of a college fund among these quick cash requirements. This fund's existence and size will rely on whether you've kids, your philosophy about the family's role in financing college, as well as the college type your child(ren) will probably go to (private or public). You might want to take these steps to safeguard the well being of your family.

Tip: Some planners are family readjustment period needs in the category of immediate needs. The readjustment period, which usually spans the very first one to 2 years after demise of a family member, involves paying off that individual's remaining obligations (auto leases and also wellness club memberships, for example), costs in sorting out the family's finances, along with possible bereavement counseling along with associated expenses. For the goals of this particular discussion, the readjustment period is considered a continuing necessity for the family.

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Tip: Consider estate preservation and liquidity needs evaluation as a substitute to the household needs strategy in case you've a sizable estate and then anticipate sizable cash expenses at death due, along with some other things, to superior estate taxes and fairly small constant cash flow requirements thereafter. As a foundation for identifying the amount of life insurance to buy, it focuses entirely on these immediate needs after death.

Constant Family Needs (Net Income Needs)

As a PG&E employee, it's crucial to think about your loved ones's ongoing needs. Your family confronts ongoing expenses for shelter, clothing, and food, among some other things, that necessitate a constant income stream. Other anticipated cash flow sources (such as Social Security survivor benefits, wages, and pension benefits) will cover a percentage of these expenses. Life insurance is going to be expected to handle the shortfall. These total cash flow needs are going to vary in quantity and also duration depending on the ages of your children, the earning capability of the surviving spouse, your family's philosophy about the period of time it ought to support your kids, as well as the presence of kids with special needs. As a PG&E employee, it's essential to account for this info therefore you and your family is able to understand the advantages to which you're permitted. Planners usually categorize ongoing requirements into 4 time periods.

Of the very first season or even 2 of readjustment, you will find costs associated with the deceased's final obligations, economic business, along with possible family counseling. The consequent times include kid dependency (in case your family has kids), spouse cash flow requirements (the blackout period), along with retirement requirements for the loved one. University or college tuition and mortgage payments (if not currently covered by fast requirements) and critical funds might fall within 1 or even much more of these time periods.

As a PG&E employee, you might wish to analyze the surviving spouse's total income requirements and also any children's total income requirements after the insured's death as a substitute to dividing the continuing cash flow requirements to these periods. You are able to estimate the spouse's annual or monthly income requirements through the rest of his or maybe her life expectancy. You are able to calculate every child's remaining monthly or maybe yearly income needs until he or maybe she reaches eighteen or maybe another age at which you foresee independence. Even though you're not segmenting your analysis into the 4 times, it can be advantageous to add lump sum expenses which might just develop during the readjustment period. You've many choices for approximating your family's total cash flow needs across the 4 time periods.

A somewhat simple choice for PG&E personnel is estimating the surviving family need around seventy % of the deceased's income. A next program is examining closely the present expenses of the opposite spouse and dependents and also estimate future expenses depending on this info. With whichever approach, you subtract the anticipated sources of income from the estimated expenditures to establish the likely total cash flow requirements that life insurance should meet, if any. Right after calculating your family's total cash flow requirements, you have to discount the future cash flow stream to its present value.

Nobody may accurately predict upcoming inflation rates and returns on different types of investments, therefore the present value number you get is just an estimate. To compute the existing value of your family's ongoing cash flow needs as a PG&E employee, you are able to often have a formulation or even the additional user friendly existing value tables. In case you use existing value tables, they'll generally provide the existing value of a dollar at different rates of return and investment durations. You just grab the appropriate number of years and percentage, find the existing value in the table, then multiply it by your total income requirements or perhaps estimated expenses.

Example(s): Assume you estimated your family's total cash flow needs through the remaining life expectancy of the surviving spouse to be $1 million for a 25 year time following the insured's demise. You conservatively estimate the inflation adjusted rate of return (discount rate) for your investments will be four %. You consider 0.375 on the existing value of one dollar table for a 25 year investment earning four %. The end result is $375,000 after multiplying $1,000,000 by 0.375. A few financial advisors advise against calculating the existing value of potential cash flow requirements, since you're just managing estimates.

Sources:

1. Brashinger, Dave. 'Life Insurance and Annuities in a Changed Planning Environment.'  The American College of Financial Services , 19 May 2024,  knowledgehubplus.theamericancollege.edu/course/new-life-insurance-and-annuities-in-a-changed-planning-environment/ .

2. 'Life Insurance.'  Personal Finance , BYU,  personalfinance.byu.edu .

3. 'The Sightlines Project.'  Stanford Center on Longevity ,  longevity.stanford.edu .

4. 'The Importance of Insurance Planning: Securing Your Financial Future.'  Rice University Online Learning Blog ,  onlinelearn.blogs.rice.edu .

5. 'Annual Enrollment Overview – Retiree Dependent Life Insurance.'  The Hartford , Texas A&M University System,  assets.system.tamus.edu .