Personal Background Information

Bill Florio (age 37) is a bank vice president. He has been employed there for twelve years and has an annual salary of $70,000. Madelyn Florio (age 37) is a full-time housewife. Bill and Madelyn have been married for eight years. They have two children, John (age 6) and Gabrielle (age 3), and are expecting their third child in two weeks. They have always lived in this community and expect to remain indefinitely in their current residence.

Insurance Information Health Insurance: The entire family is insured under Bills company plan (comprehensive major medical plan). There is a $200 family deductible, and it provides 80/20 major medical coverage. Bills employer pays the entire health insurance premium.

Life Insurance: Bill has a term life insurance policy with a face amount of $25,000 provided by his employer. The policy beneficiary is Madelyn.

Disability Insurance: Bill has a private disability insurance policy covering accidental disability for own occupation with a 30-day elimination period. In the event that Bill is disabled as provided under the policy, the benefit is $2,700 per month until age 65. The annual premium is $761 and is paid by Bill.

Homeowners Insurance: They have an HO3 policy for $195,000. The deductible is $250 and they have no endorsements.

Automobile Insurance: The annual premium is $500. Bodily damage and property damage coverage is 10/25/5. Comprehensive (OTC) deductible is $250. Collision deductible is $500.

Bill and Madelyn Florio Balance Sheet

1/1/200X

Assets Liabilities and Net Worth Cash Equivalents

Checking Account $1,518

Credit Cards $20,720

Savings Account $950

Total $2,468

Invested Assets

ABC Stock $14,050

Educational Fund $15,560

Mortgage on 401(k) $38,619

Residence $196,654

XYZ Stock $10,000

Total $78,229

Total Liabilities $217,374

Net Worth $241,823

Personal Use Assets

Principal Residence $250,000

Automobile $15,000

Jewelry $13,500

Furniture/Household $100,000

Total $378,500

Total Assets $459,197

1. The Florio family is evaluating their life insurance coverage. Bill would like to have enough insurance to provide the family with 60 percent of his current salary. Ignoring Social Security benefits and inflation, how much additional life insurance does Bill need.