How Much Life Insurance Does a Family Need? Rajiv and Sunita Malik are 40 years old and have one son, age 10. Rajiv is the primary earner, making $65,000 per year. Sunita does not currently work. The Maliks have decided to use the needs-based approach to calculate the value of a life insurance policy that would provide for Sunita and their son in the event of Rajiv's death. The Maliks' Needs They estimate that final expenses (such as funeral costs and estate taxes) would be $10,000 The Maliks are cautious and decided to replace Rajiv's income for 25 years, when Sunita will be 65. Assume that Sunita would invest the life insurance proceeds at a 3% after-tax, after-inflation rate of return. Even though Sunita would be eligible to receive survivor's benefits when she reaches the age of Security retirement benefits Before the birth of their son, Sunita worked as a mechanical engineer, but her knowledge and skills are now somewhat outdated. Therefore, the Maliks will include $20,000 for Sunita to go back to school The Maliks have home improvements of $150,000 and a credit card balance of $1,800. They have 17 years left on the mortgage on their home, but they have provided for its payment with Rajiv's replaced income. A college education at the local public university costs $25,000 today. They will use this figure in the needs assessment with the understanding that Sunita would invest the insurance proceeds. Final expenses Income replacement and then Social years later, they want an extra cushion. Readjustment period Debt repayment College expenses The Malik's Existing Assets and Government Benefits The family would qualify for $3,800 monthly Social Security survivor's benefits until the son is a 3% after-tax, after-inflation rate of return. Pay attention to the length of time the son will be eligible for benefits and compute your answer based on how long he will be eligible for those benefits There is equity in the Malik's home, as well as balances in their 401(k)s that they do not want to have to rely on for the family's support if Rajiv dies. There is currently no life insurance on Rajiv's life Government benefits years old. Assume that Sunita will invest the benefits at Existing assets Using this information and the following table, complete the worksheet to determine how much Rajiv should insure his life for. Round your answers to the nearest dollar. Enter zero (0) in any rows for which there is no figure. For Social Security survivor's benefits or allowance for any current insurance or assets, enter a minus sign followed by the dollar amount. How Much Life Insurance Does a Family Need? Rajiv and Sunita Malik are 40 years old and have one son, age 10. Rajiv is the primary earner, making $65,000 per year. Sunita does not currently work. The Maliks have decided to use the needs-based approach to calculate the value of a life insurance policy that would provide for Sunita and their son in the event of Rajiv's death. The Maliks' Needs They estimate that final expenses (such as funeral costs and estate taxes) would be $10,000 The Maliks are cautious and decided to replace Rajiv's income for 25 years, when Sunita will be 65. Assume that Sunita would invest the life insurance proceeds at a 3% after-tax, after-inflation rate of return. Even though Sunita would be eligible to receive survivor's benefits when she reaches the age of Security retirement benefits Before the birth of their son, Sunita worked as a mechanical engineer, but her knowledge and skills are now somewhat outdated. Therefore, the Maliks will include $20,000 for Sunita to go back to school The Maliks have home improvements of $150,000 and a credit card balance of $1,800. They have 17 years left on the mortgage on their home, but they have provided for its payment with Rajiv's replaced income. A college education at the local public university costs $25,000 today. They will use this figure in the needs assessment with the understanding that Sunita would invest the insurance proceeds. Final expenses Income replacement and then Social years later, they want an extra cushion. Readjustment period Debt repayment College expenses The Malik's Existing Assets and Government Benefits The family would qualify for $3,800 monthly Social Security survivor's benefits until the son is a 3% after-tax, after-inflation rate of return. Pay attention to the length of time the son will be eligible for benefits and compute your answer based on how long he will be eligible for those benefits There is equity in the Malik's home, as well as balances in their 401(k)s that they do not want to have to rely on for the family's support if Rajiv dies. There is currently no life insurance on Rajiv's life Government benefits years old. Assume that Sunita will invest the benefits at Existing assets Using this information and the following table, complete the worksheet to determine how much Rajiv should insure his life for. Round your answers to the nearest dollar. Enter zero (0) in any rows for which there is no figure. For Social Security survivor's benefits or allowance for any current insurance or assets, enter a minus sign followed by the dollar amount
