Question

Andrew (52) and Kristin (46) are the married parents of two young children (ages 8 and 9). Andrew is employed as a biologist for a start-up medical firm with a stable annual salary of $200,000. Kristin works part time as a pharmacist making $125,000/year. Andrew and Kristin have different levels of risk tolerance. Andrew tends to be a riskier investor and Kristin is by far more conservative. The family has no outstanding debt outside of a mortgage on their primary residence. The outstanding mortgage balance totals $280,000 against a fair market value of the home of $520,000. Their liquid assets consist of jointly held bank deposits ($10,000), mutual fund ($78,000) and combined retirement assets of $500,000. The only life insurance they own is a one-year term policy on John through his employer that covers 2x his base salary. Kristin does not carry any life insurance. The family spends roughly 37% their combined base salaries on taxes, with the remainder used to provide for their family. They plan to retire at age 67. Assume a 5% opportunity cost in any analysis. The couple’s goals are to provide enough life insurance in the event of their premature death to provide for their children to age 18 and to provide some funds for their college education ($200,000 in total for both kids).Please complete the following:1) Determine the “family type” Andrew and Kristin represent and discuss the level of need for life insurance given this family type. 2) Calculate the amount of insurance (on one or both) they should obtain given their personal information and goals as noted above using the multiple approach, the needs approach, the capital retention approach and human life value 3) Finally, what type of life insurance would you recommend they obtain and why?

Answer 1

SOLUTION:-

1.)

• Andrew and Kristin appear as though youthful grown-ups in the age scope of 32-38 and taking agander at their Finances and Net worth, they appear in a decent budgetary standing.
• They just have house Mortgage and will keep on utilizing their Income to take care of the Installments towards their home.
• To the extent Insurance goes, they're certainly under protected.
• In spite of the fact that Andrew get Insurance give from his manager, it's not so much a smart thought to depend on it as the Insurance spread will go on the off chance that he decides to go separate ways with the company in future and the Premiums would be a lot higher than they're correct currently as he'd have to purchase spread once he leaves.

2).

• Thus, it's basic they purchase a spread for them two as them two are gaining and will have about 10 years pay according to current levels as their whole guaranteed.
• This implies Andrew should purchase an Insurance with atleast 2 million Sum Assured and Kristin with 1.2 Million.

3).

• There are comprehensively two kinds of Insurance plans and severa cycles among them.
• These are Endowment Plans and Term Plans.
• Enrichment plans charge a higher Premiums consistently for a lower Sum guaranteed however return the Premium paid to Insurance Company towards the finish of Insurance term if there is no loss.
• Term Plan are unadulterated hazard takes care of and expense division of What blessing plans cost for an a lot higher aggregate guaranteed.

Since, the total guaranteed learned in point 2 is a major number and they'd need to leave that aggregate for their kids, going for a term plan ideally an Online Term Plan is a decent decision as Sum Assured would be as wanted for a lower costs.

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