Chapter 12 Financial Planning Questions

Chapter 12 Financial Planning Questions

1. Calculating the amount of life insurance needed using the Easy Method. You are the wage earner in a “typical family,” with $40,000 gross annual income. Use the easy method to determine how much life insurance you should carry.

2. Estimating life insurance needs using the DINK Method. You and your partner are in good health and have reasonably secure jobs. Each of you makes about $28,000 annually. You own a home with an $80,000 mortgage, and you owe $10,000 on car loans, $5,000 in personal debt, and $3,000 in credit card loans. You have no other debt. You have no plans to increase the size of your family in the near future. Estimate your total insurance needs using the DINK method.

3. Using the “Nonworking spouse method to determine insurance needs. Tim and Allison are married and have two children, ages 4 and 7. Allison is a “nonworking” spouse who devotes all of her time to household activities. Estimate how much life insurance Tim and Allison should carry using the Nonworking spouse method.