Question

Calculate Life Insurance Needs Directions: Calculate the life insurance needs in each scenario below using the appropriate method-7/70 method, 50% method or single parent method. 1. A woman who earns a salary of $62,000 decides to purchase a life insurance policy. She is married with two children and wants to be able to cover their college tuition. The children are 13 and 15 years old. Therefore, she decided to use the 7/70 method. How much should her life insurance policy be worth? 2. A single man who earns a salary of $47,000 has no children. However, he wants to be able to help his elderly father with medical expenses. The single man's debt is $8,000 and expected funeral expenses are $5,000. Using the 50% method, how much should his life insurance policy be worth? 3. A woman who earns a salary of $78,000 has twin three-year olds. Her husband provides full-time care for them. Using the single parent method, how much life insurance policy should she purchase?

Answer 1

1. 7/70 method

This method has you multiplying your annual gross income by 70% and then multiplying that by 7. This gives you 7 years of wages at 70%

Life insurance policy worth = $62000*70%*7 = $303,800

2. 50% method

This method has you adding half of all your debts plus funeral expenses

Life insurance policy worth = funeral expense + debt/2 = $5000 + $8000/2 = $9000

3. This method requires you to multiply the number of years your youngest child takes to reach 18 with $10000

Years to reach 18age = 18 - 3 = 15

Life insurance policy worth = 15 * $10000 = $150,000