Wendy and Frank Cotroni, ages 30 and 35, plan to purchase life insurance. Wendy does not have any coverage, while Frank has a $150 000 policy at work. The Cotronis have two children, ages three and five. Wendy earns $28 000 from a home-based business. Frank’s annual salary is $55 000. They save $7500 annually. The children will be financially dependent for another 15 years. 

In preparation for a visit with their insurance agent, the Cotronis have estimated the following expenses if Frank were to die:

• Immediate needs at death: $25 000
• Outstanding debt (including mortgage repayment): $90000
• Transitional funds for Wendy to expand her business: $35000
• Post-secondary expenses for their two children $50000

Wendy projects her annual income to be $40000 after her business expansion. Once the children are self-supporting, she estimates her pre-retirement income needs at $55000 per year, from age 45 to 65. She would also like to replace 50 percent of her income in retirement, from age 65 to age 85. She anticipates receiving a 6 percent return, compounded annually, on her investments. To date, the Cotronis have accumulated a total of $107000 of assets. This includes $10 000 considered as an emergency fund, $32000 for Wendy’s retirement, $35000 in joint non-registered investments, and $30000 for Frank’s retirement. Using the budget method, estimate the amount of additional life insurance, if any, that the Cotronis should purchase to protect Wendy and the kids if Frank should die. Wendy would like you to determine this amount on a pre-tax basis and does not need to adjust the income benefit for annual inflation. What type of life insurance policy would you recommend that Frank purchase? Should Wendy purchase a life insurance policy? Why or why not? If so, what type of policy would you recommend for Wendy?