The most reasonable estimation of insurance need?

Reference no: EM13153657

Theresa Cortez is the primary breadwinner for a family of four. Her husband has been unable to work since the onset of severe vertigo 2½ years ago. Their two children are both in high school and, presumably, college bound. After attending your seminar about life insurance planning, she has come to you to determine whether she has enough life insurance. Besides the small disability check that her husband receives, she is the only source of income-albeit a good income of $84,000 per year. At your request, she has brought her most recent annual income and expense statement that shows the family's annual expenses of $55,000, annual taxes of $17,000, and savings of $12,000.

Calculate Theresa's current insurance need using the Human Life Value approach for each of the following four scenarios, assuming her remaining working life is 26 years and the projected discount rate is 8.0% before taxes, compounded daily.
a. Using her gross income.
b. Using her gross income and a growth rate of 3.5%.
c. Using her net income.
d. Using her net income and a growth rate of 3.5%.

Which of these four methods would result in the most reasonable estimation of insurance need?

Reference no: EM13153657

Questions Cloud

Business research in decision making : You will need to provide a 1 page proposal for your project. You will need to define a problem within your current work situation that requires action and the research to resolve. If you do not have a current position select something from an old emp..

Large scale pharmaceutical manufacturing company : A large scale pharmaceutical manufacturing company estimates, based on a shipping fee of $1000 per order, that they can optimally balance inventory holding costs and shipping costs for one of their frequently used chemicals if they receive shipments ..

Calculate john''s insurance need using the capital retention : a. Calculate John's insurance need using the capital retention approach, an after-tax discount rate of 5.5%, and assume end-of period payment of benefits. b. Calculate John's insurance need using the human life value approach (HLV), an after-tax disc..

Brutus and antony in julius caesar by shakespeare : I have to compare and contrast two passages by Brutus and Antony in Julius Caesar by Shakespeare. Which passages should I do?? I need to find some that show their personalities and what they believe, etc.

The most reasonable estimation of insurance need? : Which of these four methods would result in the most reasonable estimation of insurance need?

Relationship between space and geography : What is the relationship between space, geography, and identity in Aritha van Herk's "Calgary is a Growing Graveyard"? I have to write an essay on this, can someone help?

Critical path of your project : Analyze the critical path of your project, and discuss the total float in the project. Next, suggest the primary measures that you would use in order to manage the critical path and reduce the float in the project.

Herding/bandwagon effect and overreaction towards new inform : Herding/Bandwagon Effect: This is the tendency for individual traders to mimic the actions (rational or irrational) of the market. Individually, the trader would not necessarily have made the same choice.

Novel to farewell to arms by ernest hemingway : I have an essay assingment to write based on the novel To Farewell To Arms by Ernest Hemingway. I have to justify whether this novel is a tragedy or romance genre in nature.

User Account

All Pages