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Andrea and Ryan have three kids. All of the kids are age 5 or younger. Ryan...

Andrea and Ryan have three kids. All of the kids are age 5 or younger. Ryan works full-time and makes enough to support the entire family. Andrea does not have a job and stays at home to take care of the kids. Is there an economic justification to purchase life insurance for Andrea? You must provide an explanation for why or why not.

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Answer #1

In the current situation, there is no economic justification to purchase life insurance for Andrea.

The reason is that Andrea currently does not have a job. Her current income is zero, and there is no information which says that Andrea will start working and earning soon. Hence, her future income is zero . We can therefore conclude that the present value of her future income is zero.

Ryan currently earns enough to support the entire family. So purchasing life insurance fore Andrea is not worth it as she has no earnings currently. The premium for life insurance would actually be an additional and avoidable burden on the family.

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