Case Study: Zac and Mary Johnson Life Insurance Analysis

Overview

Zac and Mary Johnson are $36$ and $34$ respectively. Zac has recently been offered a new job as an IT engineer with a newly created software company that helps churches fully integrate their giving, attendance, and member data software where he can earn $$102,000$ per year. Mary currently stays home and homeschools their two children $($Brayden $(10)$ and Cora $(7))$ although she holds a CPA license in the state of Indiana. Zac and Mary also have two Mastiffs $($Fun and Games$).$ Zac and Mary have been married for $14$ years and currently live in a rural area outside Indianapolis, IN$.$

Zac and Mary are excited to have just learned that they are expecting their third child. Knowing

his type A personality, Zac begins to feel anxious that he has not done an adequate job of

protecting his family should something happen to him, especially with the anticipation of a third

child.

Zac approaches you in your local men$$s bible study and asks to meet with you regarding a review of his current insurance. He seems rather bothered by where he stands, specifically not knowing how much life insurance he really should have.

In the course of your follow$-$up meeting, he gives you the following information:

$$ Current salary: $$102,000$

$$ Annual salary increase: $3\mathrm{.}0\%$

$$ Retirement Age: $67$

$$ Expected inflation rate: $3\%$

$$ Final expenses: $$30,000$

$$ Income Tax bracket: $25\%$

$$ Monthly social security benefit per child until the child reaches $18$: $$3,200$

$$ College education costs $$25,000$ per year per child in today$$s dollars starting at age $18$ for

four years.

$$ Education inflation rate: $5\%$

$$ Monthly income needs for spouse until last child is age $22$: $$5,500$

$$ Personal Consumption: $20\%$ of income

$$ Investment returns expected to be $6\%$

$$ Mortgage and debt repayment $($as it stands today$)$ is: $$285,000$

INSTRUCTIONS

Analyze each of the approaches listed below, including detailed calculations, to build a final recommendation concerning the Johnson$$s life insurance needs:

$$ Human$-$Life Value Approach

$$ Needs Approach$-$page $150$

$$ Capitalized$-$Earnings Approach$=$page $151$

After reviewing the different ways to determine one$$s life insurance needs, consider the following questions and generate your response with at least three scriptural references:

$$ As believers, wouldn$$t purchasing life insurance be replacing our faith in God to provide for us$?$

$$ Will God not provide for our needs if something were to happen to either spouse?