1. Using Worksheet 12, determine the amount of additional life insurance, if any, that the Kampes should purchase to protect Wendy if Frank should die.
2. Should Wendy purchase an insurance policy? Why or why not? If so, what type of policy would you recommend for Wendy?
3. What type of life insurance policy would you recommend that Frank purchase?
4. What will happen to Frank's group life insurance if he leaves his present job?
5. What could happen to the Kampes' children if Frank or Wendy should die without adequate life insurance coverage?
6. Should the Kampes name the children as life insurance beneficiaries?
7. Which life insurance riders might the Kampes select when purchasing a policy?
8. Since they will make a concerted effort to become informed about life insurance, should the Kampes also purchase life insurance on the children rather than waiting until later when they would have to reeducate themselves for life insurance shopping?
9. The Kampes save $7,500 a year for an emergency fund, retirement, and other investments, with the remainder spent to support their lifestyle. How might the concept of mental accounting and Principle 9: Mind Games, Your Financial Personality, and Your Money affect their decision to purchase life insurance?
Wendy and Frank Kampe, 30 and 35, are considering the purchase of life insurance. Wendy doesn't have any coverage, whereas Frank has a $150,000 group policy at work. The Kampes have two young children, ages 3 and 5. Wendy earns $28,000 annually from a part-time, home-based business. Frank's annual salary is $55,000. From their income, they save $7,500 a year. The rest goes for expenses. The couple estimates that the children will be financially dependent, except for college costs, for about another 15 years. Once the children are in college, Wendy assumes their annual expenses will be $60,000.
In preparation for a visit with their insurance agent, the Kampes have estimated the following expenses if Frank were to die:
Immediate needs at death ………………………………………………………… $25,000
Outstanding debt (including mortgage repayment) ………………………………. $90,000
Transitional funds for Wendy to expand her business to fully support the family… $15,000
College expenses for their two children ………………………………………….. $205,000