Question
In: Finance
Please use the "Needs Approach" to determine the recommended life insurance coverage for Jun-Li. She would...
Please use the "Needs Approach" to determine the recommended life insurance coverage for Jun-Li. She would like to have enough insurance to meet her final expenses ($25,000), pay off her loans, and provide 2 years of income for her survivors. Jun-Li has a mortgage balance of $250,000, an auto loan balance of $30,000, credit card debt of $2,000, and a federal student loan with a balance of $22,500. Her annual salary is $70,000. How much life insurance coverage would you recommend to Jun-Li to be sure her goals are met?
A.
$307,000
B.
$467,500
C.
$447,000
D.
$469, 500
Solutions
Expert Solution
Final Expenses = 25000,
Total loans outstanding = Mortgage balance + Auto loan balance + credit card debt + Federal student loan = 250000 + 30000 + 2000 + 22500 = 304500
Annual salary = 70000
2 years of income = 2 x Annual salary = 2 x 70000 = 140000
According to Needs approach, amount of insurance needed should be sufficient to cover immediate and potential future needs of the family after the death of insured
According to Jun Li ,her needs consist of meeting final expenses, paying off her loans and provide income for 2 years to survivors.
Life insurance recommended = Final expenses + Total loans outstanding + 2 years of income = 25000 + 304500 + 140000 = 469500
Hence Answer is D. 469500
jeff jeffy answered 2 years agoRelated Solutions
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