Two years after Martin Marcotte's mother was injured, she passed away as a result of complications arising from her disability. Mrs. Ruth Marcotte left behind a small life insurance policy. The Marcottes were surprised at the immediate expenses directly following Ruth's death, especially because the policy only covered some of these expenses.

This has forced the couple to take a second look at their own life insurance coverage, given that their children, Paloma and Joel, are 12 and 9 years old, respectively. Martin's current salary is $55,000, and he has a

$100,000 policy from his employer. He also has a

$50,000 policy that he took out five years before getting married. Luz has a

$25,000 policy that she purchased about

15 years ago, but no coverage through an employer. In total, the couple has $175,000 in life insurance coverage.

The Marcottes main concern is to make sure that the children are taken care of in the event that either or both of them were to pass away. Beyond that, they would like to provide for funeral coverage, and use the cash value of their policies as an inheritance for their children. They are not currently in a financially stable situation, however, since Martin just started a new job, Luz is not working full-time, and they have just invested in a new house and car.

1. Estimate the life insurance requirement for the Marcottes using the "Easy Method" and the "Non-working Spouse Method."

2. Given that the Marcottes have specific goals they want to accomplish with their insurance policies, would you recommend a term or whole-life policy for them?

3. What are some of the settlement options that the Marcottes can opt for?

4. Mr. Marcotte is 45 years old and decides to get a

$10,000 face amount, limited payment, participating policy. At the end of the

20 years the cash value is $5000. The total dividends during the

20 years are $1500. The Marcottes can earn about

8% in a stock mutual fund if they decide to forgo the policy and use the premiums

to invest in a stock fund. Premiums are running about $200 a year;

$4000 for the duration of

20 years. What is the net cost of the policy to the Marcottes?