Zac and Mary Johnson are 36 and 34 respectively. Zac has recently been offered a new job as an IT engineer with a newly
Posted: Wed May 18, 2022 11:34 pm
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: 3.0%
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 Capitalized-Earnings Approach
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: 3.0%
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 Capitalized-Earnings Approach