PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
6th Edition
ISBN: 9781337117005
Author: Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher: Cengage Learning
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Chapter 8, Problem 2FPE
Summary Introduction
To discuss: The kind of policy person E might purchase and the amount of total life insurance requirements.
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You are a dual-income, no-kids family. You and your spouse have the following debts:
Mortgage = $261,000; Auto loan = $10,000; Credit card balance = $2,150; and other debts = $6,200. Further, you estimate that your
funeral will cost $9,000. Your spouse expects to continue to work after your death. Using the DINK method, what should be your need
for life insurance?
Total insurance need
$
288,350
Deciding if additional life insurance is needed and, if so, appropriate type. Use Worksheet 8.1. Harvey Cook, 45, is a recently divorced father of two children, ages 10 and 7. He currently earns $95,000 a year as an operations manager for a utility company. The divorce settlement requires him to pay $1,500 a month in child support and $400 a month in alimony to his ex-wife. She currently earns $35,000 annually as a schoolteacher. Harvey is now renting an apartment, and the divorce settlement left him with about $100,000 in savings and retirement benefits. His employer provides a $75,000 life insurance policy. Harvey’s ex-wife is currently the beneficiary listed on the policy.
What advice would you give to Harvey? What factors should he consider in deciding whether to buy additional life insurance at this point in his life? If he does need additional life insurance, what type of policy or policies should he buy? Use Worksheet 8.1 to help answer these questions for Harvey.
Life Insurance Needs for a Young Married Couple. Amy and Mack Holly from Rapid City, South Dakota, have been married for three years. They recently bought a home costing $212,000 using a $190,000 mortgage. They have no other debts. Mack earns $62,000 per year, and Amy earns $71,000. Each has a retirement plan valued at approximately $20,000. They recently received an offer in the mail from their mortgage lender for a mortgage life insurance policy of $190,000. Their only life insurance currently is a $20,000 cash-value survivorship joint life policy. They each would like to provide the other with support for at least five years if one of them should die.
a.) What amount of coverage should they get? Explain.
Chapter 8 Solutions
PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
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