Question

Shaan and anita are married and have two children, ages 9 and 15. anita is a "nonworking" spouse who devotes all of her time to household activities. estimate how much life insurance shaan and anita should carry.

Answer 1

Answer:

$90,000

Explanation:

Generally when there is only one working spouse in a household and you want to get insurance to cover child care needs, you can use the non-working spouse method which is very simple to calculate but will also carry a very low amount.

This method is used only to calculate child care needs, not the total financial needs of the family. It is part of the needs approach calculation that also includes an amount to cover mortgage payments, education fund, emergency fund, etc. Each need is calculated separately.  

generally you have to calculate how many more years will your youngest child be a minor (18 - 9 = 9) and then multiply by the annual costs of child care services, since we do not know it, we can use $10,000. The policy should carry a total value of $10,000 x 9 = $90,000.

The other methods of calculating an insurance policy include other expenses and carry a much higher value, e.g. multiply your salary times the number of years until your retirement

Answer 2

Answer:

$90,000

Explanation:

To calculate the life insurance needed, the age of the youngest child should be deducted from 18 then multiplied by 10,000.

The workings is shown below:

18 - 9 = 9

9 × 10,000 = 90,000

Therefore, the life insurance Shaan and Anita should carry  is $90,000.