Keeran Jones
Susan Loucks
BUSN108-80N
April 3, 2016
Chapter 12
CASE 1
a. It would be safer to take Harry’s $3000 from the trust fund and add it to his annual
earned income just in case he were to die, they could calculate the total dollars lost. The
Johnsons rely on this income to meet their financial needs, and it is a big part of their
budget.
b. Since Harry currently has two insurance policies of $10,000 and $39,000, his remaining
life insurance need is $86,341. If Harry were to die, the income lost would be $135,342.
This is based on the assumptions that Belinda will not qualify for Social Security
survivor’s benefits at Harry’s death unless they have children, could earn 4 percent after
inflation and taxes on life insurance proceeds for the 4 years of need, and final expenses
will equal $10,000; readjustment expenses, $6000; and repayment of any short-term debts,
$5000.
c. Because Belinda currently has a policy through her employer for $85,500, her remaining
life insurance need is $90,678. If Belinda were to die about $176,178 would be lost.
d. Harry needs $86,300, and Belinda could use about $90,700 more life insurance to cover
their estimated 4 years of needs. The best option would be for them to buy a 5-year
guaranteed-renewable term insurance policy on each of their lives. At their ages, these two
policies would cost them approximately $200 per year. These policies could serve as a
beginning for the Johnsons’ insurance programs when the arrival of children greatly
