Sue and Tom Wright are assistant professors at the local university. They each take home about $40,000 per year after taxes. Sue is 37 years of age, and Tom is 35. Their two children, Mike and Karen, are 13 and 11.
Were either one to die, they estimate that the remaining family members would need about 75% of the present combined take-home pay to retain their current standard of living while the children are still dependent. This does not include an extra $50/month in child-care expenses that would be required in a single-parent household. They estimate that survivors' benefits would total about $1,000 per month in child support.
Both Tom and Sue are knowledgeable investors. In the past, average after-tax returns on their investment portfolio have exceeded the rate of inflation by about 3%.
If Sue Wright was to die today, how much would the Wrights need in the family maintenance fund? Use the "needs approach" and explain the reasons behind your calculations.
Suppose the Wrights found that both Tom and Sue had a life insurance protection gap of $50,000. Present the steps in sequence how Wrights should proceed to search for protection to close that gap?
2007-09-21 23:34:48 · 4 answers · asked by missfev21 1 in Business & Finance ➔ Insurance
You can't answer the question because you don't have enough facts.
75% is needed while kids are still dependent.....
that range can vary widely. It doesnt tell you how long they will be dependent for.
Are they independent at age 18?
Are they independent at age 22/23 after graduating college?
Are they ever going to be independent at some age?
Once you know the answer above, you can match the coverage to the need, shop around for quotes, compare the companies quotes, ratings, coversion, etc.., apply for coverage, wait 6-8 weeks for underwriting to complete, get a policy to review, accep/reject the policy and complete delivery requirements and pay.
2007-09-24 05:06:38 · answer #1 · answered by Anonymous · 0⤊ 0⤋
Re-post this in the education_homework forum; someone may give you the answer you need (as this really has nothing to do with insurance other than setting up a math problem).
2007-09-22 03:49:20 · answer #2 · answered by JJ 5 · 0⤊ 0⤋
Sue and Tom need to talk to their local agent to get the personalized answers they need. And if you talk to your parents' agent, they can help you answer this homework question.
2007-09-22 15:55:09 · answer #3 · answered by Anonymous 7 · 0⤊ 0⤋
Reads like a homework assignment - a simplified question at that . Use MS Excel
2007-09-22 03:06:04 · answer #4 · answered by insuranceguytx 5 · 0⤊ 0⤋