Question

In: Finance

Kathy is a thirty-two-year old, stay-at-home mother of three children aged 4, 2, and six months....

Kathy is a thirty-two-year old, stay-at-home mother of three children aged 4, 2, and six months. The family doesn't have much extra money each month. Kathy has no life insurance coverage, but she feels she should buy a policy to cover her life in case something happens to her and her husband would need to provide care for the children. Her husband does not think it is necessary. (10 points) What kind of life insurance policy would you suggest would be best for her to buy and why?

Solutions

Expert Solution

A basic concept behind life insurance is if any uncertain event happens and if the breadwinner of the family is no more to support, then if a life insurance policy is covered on the bread winner, the family shall get a lumpsum amount at the time of his demise this is the case if he has opted for term plan.

In the above case considering all the constraints given and assuming Kathy's husband is just two years older than her and he is working as a breadwinner for the family. Since it is given that they cannot afford to pay much it is advisable that a term plan can be taken up on the Kathy's husband. Since he is just 34 the premium amount will minimum for a minimum cover. One contraint on term plan is the life insured should be employed.

Therefore Kathy is advised to convince her husband to take up term plan for a minimum cover.


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