|
|
 |
|
Death
Economic Loss Evaluation and Life Insurance Need
The economic loss analysis included here includes only limited elements of the Ph.D. LIFE system and, therefore, makes a number of simplifying assumptions. Consequently, the result does not necessarily represent the economic loss to your family from your death but rather the loss to a representative family with a few of the characteristics of your own. As such, the analysis does not produce an amount that could be supported at trial and is not something to which the economists at Litigation Analytics would testify. Nevertheless, the results from this analysis do prove that the true economic loss to a family from death can be much greater than is commonly believed. It also demonstrates the fundamental role of economic loss assessment in determining your life insurance needs.
***** For this illustration, only broad occupational categories are used and simplistic assumptions are made regarding such factors as income taxes; your own consumption; investment income; household services; pensions; and many other factors critical to evaluating the economic loss to your family in the event of your death. In addition, we disregard spouse's age, and we disregard dependents.
***** The following describes the analysis performed by Ph.D. LIFE™ and notes changes to this analysis with the words "for this application".
This report was prepared using Ph.D. LIFE™, from Litigation Analytics, Inc. (LAI). Ph.D. LIFE™ is a member of LAI's Ph.D. family of expert software systems and is based on PERSONAL Ph.D.™ and Ph.D. DAMAGES™, the expert systems designed to perform economic loss evaluations for personal injury and wrongful death cases.
The economists at Litigation Analytics have been providing expert testimony in wrongful death cases for over 15 years. Moreover, since 1981, they have used the results of the very software used for this evaluation of your insurance needs to prepare their trial testimony. In fact, if you were to die a wrongful death today and your spouse became a plaintiff in a court of law, an economist from Litigation Analytics would testify to the results presented in this report, if LAI were retained in the case of either plaintiff or defendant. This assumes, of course, that the information entered into the analysis is correct and that the most current update of Ph.D. LIFE is used.
Economic Loss Evaluation and Life Insurance Need
INTRODUCTION
Each year you contribute to the financial well being of your family. In the event of your death, your family would lose this contribution. To conduct an assessment of the economic loss to your family in that event, this net contribution must first be estimated. Then, an amount of money must be determined such that, if it were provided to your family upon your death, they could replace the contribution that you would have made in each succeeding year.
To begin the loss analysis presented here, three primary components of your financial contribution to the family in each future year were estimated. These three components were:
1. Earnings for individuals in your occupation by age.
2. Fringe benefits.
3. Household services.
For each year, these three components were added together to yield an estimate of the "gross loss" to the family for that year if you are not living.
Of course, a portion of your earnings is paid as taxes. The income taxes payable on your projected earnings were estimated in each year and subtracted to yield your annual after-tax income. Next, again on a year to year basis, the value of what you will consume was estimated, as not all of your after-tax earnings will be available to the other members of your family. This consumption was estimated for each year based on the total projected annual family income after tax. These annual estimates of taxes and consumption were subtracted from the gross loss estimate for each year to yield your net contribution to your family, or the "net loss" for each year if you are not living.
In the event of death, it is this net contribution which must be replaced to protect your family against loss. That is, your family must be compensated by the amount of their net loss.
Should you die a wrongful death and should your family have access to the courts for compensation, it is this net loss which would form the basis for economic testimony in the case. Should you not die a wrongful death, the only source of compensation to your family becomes life insurance. However, their loss is the same.
LIFE INSURANCE AS PROTECTION AGAINST ECONOMIC LOSS
The amount of life insurance needed to protect your family against economic loss is simply the amount of money that would need to be invested upon your death, so that they could precisely replace their net economic loss in each year that follows. As described above, this net loss was projected using the same techniques as would be used in a court of law. All projections were performed using state of the art techniques from the professional economics literature, proven in the courtroom, using data from U.S. government agencies and research universities.
|