Prepare a two-page analysis of your insurance needs, particularly your life insurance program, but possibly including home, auto, health, and so forth. Submit the paper to this dropbox.
While consulting any of various insurance agents (life, health, property, and casualty) would be helpful for this portion of your Personal Financial Plan, consider the following simple exercise to gain perspective on life insurance, particularly how to know what level of coverage is sufficient.
To conceptualize the practical value of one’s life insurance death benefit, begin by writing out the face amount of a life insurance contract. Let’s assume that the death-benefit amount is $100,000. This exercise requires that you cross off the first four zeros starting from the right ($100,000). Multiply the remaining numbers by 2 ($10 x 2). The product or result of this calculation is the amount effectually made available to beneficiaries in terms of a daily value (in this case = $20). This assumes that none of the death benefit is used to pay debts, nor invested for other purposes. Rather, this amount would be used for daily living expenses. In other words, a $100,000 death benefit conceptually provides $20 in living expenses per day to a beneficiary. Furthermore, this $20 benefit would last for approximately 13.6 years (again, assuming no other purpose for the death benefit). This gives perspective on the value of a life insurance payout.
Students should use Worksheet 12 in the BUS-241 Resources folder on Moodle to evaluate their life insurance need. (I ATTACHED THEM BELOW)
