Question

A Married Couple with Children Address Their Life Insurance Needs Joseph and Marcia Michael of Athens,...

A Married Couple with Children Address Their Life Insurance Needs Joseph and Marcia Michael of Athens, Georgia, are a married couple in their mid-30s. They have two children, ages 5 and 3, and Marcia is pregnant with their third child. Marcia is a part-time book indexer who earned $31,000 after taxes last year. Because she performs much of her work at home, it is unlikely that she will need to curtail her work after the baby is born. Joseph is a marriage counselor; he earned $75,000 last year after taxes. Because both are self-employed, Marcia and Joseph do not have access to group life insurance. They are each covered by $50,000 universal life policies they purchased three years ago. In addition, Joseph is covered by a $50,000, five-year guaranteed renewable term policy, which will expire next year. The Michaels are currently reassessing their life insurance program. As a preliminary step in their analysis, they have determined that Marcia's three survivors would qualify for Social Security survivor's benefits of about $2,000 per month, or an annual benefit of $24,000, if she were to die. For Joseph's survivors, the figure would be $3,000 per month, or an annual benefit of $36,000. Both agree that they would like to support each of their children to age 22, but to date, they have been unable to start a college savings fund. The couple estimates that it would cost $300,000 to put all three children through a regional university in their state as measured in today's dollars. They expect that burial expenses for each spouse would total about $12,000, and they would like to have a lump sum of $50,000 to help the surviving spouse make payments on their home mortgage. They also feel that each spouse would want to take a three-month leave from work if the other were to die.

Assume that 25% of income is used for personal needs.Calculate the amount of life insurance that Joseph needs based on the information given. Use the Run the Numbers worksheet or the Garman/Forgue companion website. Assume a 3 percent rate of return after taxes and inflation and an income need for 22 years because the unborn child will need financial support for that many years. Round Present value of a Series of Equal Amounts in intermediate calculations to four decimal places. (Use Appendix A.4.) Round your answer to the nearest dollar.

Reference to appendix A-4= 15.9369

Homework Answers

Answer #1

Joseph replacement needs are as follows:-

[0.75 * $75,000* 15.9639(22years at 3%)] ==> $897,969

social security benefits amounts

==> [ $3000 * 12 * 13.7535(18 years @ 3%)]= $495,126

insurance policy should include

$12,000==>for her burial,

$50,000==>home mortgage,

$300,000==>their education and

$36,000==>her husband sorrow period.

Total= [12,000+50,000+300,000+36,000]= $398,000

Her financial needs==> $398,000+$897,969

==>$1,295,969

therefore,

Financial needs==>$1,295,969

Social security benefits==>$495,126

Universal life insurance==>$50,000

Additional Insurance

==>[1,295,969 - 495,126 - 50,000]

==> $750,843

-------------------------------------------------------------------

Hope this will help, please comment if you need any further explanation, Please Encourage us by Up Voting the Answer which is Very Helpful to us. Thank You!

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A Married Couple with Children Address Their Life Insurance Needs Joseph and Marcia Michael of Athens,...
A Married Couple with Children Address Their Life Insurance Needs Joseph and Marcia Michael of Athens, Georgia, are a married couple in their mid-30s. They have two children, ages 5 and 3, and Marcia is pregnant with their third child. Marcia is a part-time book indexer who earned $31,000 after taxes last year. Because she performs much of her work at home, it is unlikely that she will need to curtail her work after the baby is born. Joseph is...
Personal Financial Plan for “Jack and Jill” Jack and Jill are married and a middle-aged couple....
Personal Financial Plan for “Jack and Jill” Jack and Jill are married and a middle-aged couple. In order to achieve their goals, they hope to retire and must, therefore, ensure they have enough savings to cater for their needs in their golden days. As a married couple, they have made several investments and are not sure whether their insurance coverage is adequate. They are not sure whether they have enough financial resources to last them for the rest of their...
Jeremy and Alyssa Johnson have been married for five years and do not have any children....
Jeremy and Alyssa Johnson have been married for five years and do not have any children. Jeremy was married previously and has one child from the prior marriage. He is self-employed and operates his own computer repair store. For the first two months of the year, Alyssa worked for Office Depot as an employee. In March, Alyssa accepted a new job with Super Toys Inc. (ST), where she worked for the remainder of the year. This year, the Johnsons received...
Howard and Millie, 28 and 26 respectively, is a young family without children. Howard works as...
Howard and Millie, 28 and 26 respectively, is a young family without children. Howard works as an engineer for a medium size manufacturing company, earning $70,000 per year. Millie works part-time at a doctor's office, earning $20,000 per year. They expect that their income will keep pace with inflation, which is expected to be 2% per year. Millie does all the housework, such as cooking meals and cleaning the house. She estimates that it would cost $18,000 to hire somebody...
Jeremy and Alyssa Johnson have been married for five years and do not have any children....
Jeremy and Alyssa Johnson have been married for five years and do not have any children. Jeremy was married previously and has one child from the prior marriage. He is self-employed and operates his own computer repair store. For the first two months of the year, Alyssa worked for Office Depot as an employee. In March, Alyssa accepted a new job with Super Toys Inc. (ST), where she worked for the remainder of the year. This year, the Johnsons received...
Jeremy and Alyssa Johnson have been married for five years and do not have any children....
Jeremy and Alyssa Johnson have been married for five years and do not have any children. Jeremy was married previously and has one child from the prior marriage. He is self-employed and operates his own computer repair store. For the first two months of the year, Alyssa worked for Office Depot as an employee. In March, Alyssa accepted a new job with Super Toys Inc. (ST), where she worked for the remainder of the year. This year, the Johnsons received...
Sonja, age 25, recently purchased a $100,000 ordinary life insurance policy on her life. The waiver-of-premium...
Sonja, age 25, recently purchased a $100,000 ordinary life insurance policy on her life. The waiver-of-premium rider and guaranteed purchase option are attached to the policy. For each of the following situations, indicate the extent of the insurer’s obligation, if any, to Sonja or to Sonja’s beneficiary. Identify the appropriate policy provision or rider that applies in each case. Treat each event separately. a. Sonja fails to pay the second annual premium due on January 1. She dies 15 days...
1. Just before his first attempt at bungee jumping, John decides to buy a life insurance...
1. Just before his first attempt at bungee jumping, John decides to buy a life insurance policy. His annual income at age 30 is $39,000, so he figures he should get enough insurance to provide his wife and new baby with that amount each year for the next 35 years. If the long-term interest rate is 6.1%, what is the present value of John's future annual earnings? (Round your answer to the nearest cent.) $   Rounding up to the next...
Demarco and Janine Jackson have been married for 20 years and have four children who qualify...
Demarco and Janine Jackson have been married for 20 years and have four children who qualify as their dependents (Damarcus, Janine Jr., Michael, and Candice). The couple received salary income of $100,000 and qualified business income of $10,000 from an investment in a partnership, and they sold their home this year. They initially purchased the home three years ago for $200,000 and they sold it for $250,000. The gain on the sale qualified for the exclusion from the sale of...
Demarco and Janine Jackson have been married for 20 years and have four children who qualify...
Demarco and Janine Jackson have been married for 20 years and have four children who qualify as their dependents (Damarcus, Janine Jr., Michael, and Candice). The couple received salary income of $100,000 and qualified business income of $10,000 from an investment in a partnership, and they sold their home this year. They initially purchased the home three years ago for $200,000 and they sold it for $250,000. The gain on the sale qualified for the exclusion from the sale of...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT