Needs for Life Insurance Rudy and Karyn also have questions about life insurance

Question

Needs for Life Insurance Rudy and Karyn also have questions about life insurance for you.

Currently, they each are paying premiums for $100,000 of life insurance offered through their employer. They are listed as the primary beneficiary on each other’s policies and their 2 kids, Kelsey and Jacob, are listed as the contingent beneficiaries. Listed below is the information that you have gathered from them:

- Yearly Income: $80,000 each (Household income $160,000) -

Yearly Household expenses (including emergency & retirement savings): $125,000

- $15,000 in credit card debt

- $300,000 total in current savings

- Future expected Expenses: o $100,000 for each child for college expenses o

$150,000 in remaining mortgage debt on house

Problem 4: Based on the income method, what is the total amount of insurance that Rudy and Karyn would need to cover their survivors’ income needs for 5 years? For 10 years? Assume this is for the children if they both were to die together in an accident. (Hint: the income method is based solely on income; expenses and debts or plans to spend “specifics” are disregarded under this method.

Explanation / Answer

In the income method only gross income of a family or a subject is considered and other expenses are ignored.

Then this income will bemultiplied by number of years to get insurance amount.

Here Gross yearly income of Rudy and Karyn is $80000

Thus For 5 years insurance amount= Current gross income* number of years

=80000*5

For 5 years insurance amount=$400000

For 10 Years insurance amount required= Curren gross income* number of years

=80000*10

For 10 Years insurance amount required=$800000

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