1. How much life insurance should you obtain on your life? Explain how you determined this.

2. Assuming you purchase term life insurance, for how many years should the policy last? 5, 10, 15, 20, 25, or 30 years? Explain why.

3. Explain why you desire to purchase term life insurance with a conversion feature. And, what is a “conversion option”?

Term Life Insurance: Amount, Duration, Conversion. You are a new personal financial advisor. Your job is deemed to be secure, and you are making $50,000 a year. You anticipate raises of 20% per year, for the next 4 years, and that you will be making $100,000 a year five years from now. After that, you expect that you will receive raises at a rate equal to inflation.

You are getting married, and you desire to start a family. Your spouse will have $45,000 a year of income, from a steady job.

If you were to die, and have one child, your spouse would receive $1,000 per month for the care of the child from Social Security, until such time as the child attains age 18. This helps, but it mainly just covers the added costs of child care. You fully anticipate that your child will attend college.

You have no substantial savings, other than a cash reserve account. You have no investment portfolio at the present time.

But, you also have no debt at the present time. Nor does your spouse. You and your spouse have decided to rent a condominium for many years, instead of buying a house, as you desire the flexibility to move should better job opportunities arise for either of you.

When you achieve $100,000 a year in income, you will be paying 7.65% FICA taxes, and saving 17.35% of your paycheck each month. You will be paying $20,000 in total federal and state income taxes. The remaining amount, $55,000 each year, will be spent on both necessaries and travel/entertainment.