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Mindy is single and has been working as a financial aid officer for a local community...

Mindy is single and has been working as a financial aid officer for a local community college. Mindy owns a home valued at 190,000 on which she owes $170,000. She has a 3 year old vehicle valued at $10,500 on which she owes $6000. Her retirement account has grown to $6000 and she owns some stock valued at $3000. Mindy has no life insurance and is considering buying some. How much should she buy?
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Answer #1

In the above problem, it has been given that Mindy has the following asset and liabilities:

Assets:

Retirement account 6000

Stock 3000

Home equity 190000

Vehicle equity 10500   

Total 209500

Liabilities

Home 170000

Vehicle 6000

Total 176000

So Mindy has a net asset of 33500. However, since the unpaid loans (170000 + 6000) = 176000 needs to be funded from liquid assets in case of death.

So the life insurance amount should be equal to 176000 - 9000 = 167000

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