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1. Life Insurance Needs for a Young Married Couple. Amy and Mack Holly from Rapid City,...

1. Life Insurance Needs for a Young Married Couple. Amy and Mack Holly from Rapid City, South Dakota, have been married for three years. They recently bought a home costing $212,000 using a $190,000 mortgage. They have no other debts. Mack earns $62,000 per year, and Amy earns $71,000. Each has a retirement plan valued at approximately $20,000. They recently received an offer in the mail from their mortgage lender for a mortgage life insurance policy of $190,000. Their only life insurance currently is a $20,000 cash-value survivorship joint life policy. They each would like to provide the other with support for at least five years if one of them should die. a.) What amount of coverage should they get? Explain.

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Expert Solution

Calculations for support for at least five years if one of them should die
Needs:
Salary for 5 years taking the minimum salary of the two(62000*5) 310000
Retirement plan contributions(20000*5) 100000
Home mortgage 190000
Total needs 600000
Less: Cash value of Joint-LIP at hand 20000
Further insurance coverage amount needed 580000

jeff jeffy answered 2 years ago
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