In: Accounting
Charles and Ann live in a house that they purchased four years ago. It is a large Victorian-era home with 12 rooms and cost them $250,000 at the time
Charles has life insurance three times his salary (salary - $81,000) from the college, and Ann has life insurance through her employer for twice her salary(salary - $40,000). Charles and Ann each purchased five-year term individual insurance policies from a local insurance broker when they purchased the house, with a face value of $250,000.
Questions
1. In the current scenario Charles has insurance cover from his college thrice his salary (81000*3) and five year term individual insurance policy of $250000 so total insurance cover he has $493000(243000+250000) and his wife Ann has insurance cover twice his salary (40000*2)=$80000 and in and five year term individual insurance policy of $250000 so total insurance cover she has $230000 (80000+250000)
2. It is mostly said that a person should be insured atleast 8-10 times of your annual salary and if we go by that calculation both of them are underinsured
3. Insurance is something which generally is taken so that if anything happens to the sole earner of the family then atleast all your debts are paid off and your dependent does not have to suffer and all his expenses are taken care of, In this scenario Charles & Ann both are working and nor do they have any debts to cover , nor they have any dependents hence the coverage what they have is quite sufficing