Week 03 Written Assignment

  1. Use the following link from Illinois Mutual Life Insurance Company and the information below to determine the Human Life Value for Sally and Kristin. http://www.illinoismutual.com/LifeInsurance/CalcHLV.aspx

    Sally and Kristin hold the same position at an accounting firm and earn $45,000 annually with an expected 3% raise per year. They share the same fringe benefits which amount to approximately $12,000 per year and both have $250,000 of life insurance. Both women are 35 and plan to retire at the age of 65.

    Sally is a single mom with two children. A majority of Sally's income, 75%, is spent on personal maintenance for her and her children, and she pays approximately 24% of her income to taxes each year. Kristin is part of a dual income family and spends only 30% of her income on personal maintenance. Kristin and her husband are in the 34% tax bracket. Assume that non-monetary contribution to family is zero for both Sally and Kristin and that their after tax discount rate is 5%.

  2. The Illinois Mutual Life website states that "The Human Life Value approach to valuing a life involves a capitalization of that part of a wage earner's income devoted directly to the support of his/her family. The Human Life Value is of particular importance to those families that are more dependent on 'People at Work' rather than 'Capital at Work'." Do you agree or disagree with this statement? Why?

  3. How could a person use a Human Life Value calculation and a mortality table to determine how much life insurance to purchase?

  4. What other considerations should a person take when determining how much life insurance to buy?
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