Maryanne is seeking sufficient life insurance cover to provide for her children. Currently, Maryanne earns $95,000 p.a. and she has assessed that approximately 80% of this amount will be needed on an annual basis to support her children for 25 years. She would also like to provide an initial capital amount of $400,000 at the time of her death to cover funeral costs and clear the mortgage, and money for education costs.
Use the multiple approaches to calculate Maryanne’s life insurance cover required and assume an earnings rate of 6%.
(a)Calculate the life insurance cover required.

(b) What difference would it make to your calculations in part a) of this question if the earnings rate was increased to 8%? Why would such a difference be expected?

Answer rating: 100% (QA)

Part 1 1 Future needs approach Maryanne will need 95000 per year to support her children for 25 year... View the full answer