Sue and Tom Wright are assistant professors at the local university. They each take home about $42,000 per year after taxes. Sue is 37 years of age, and Tom is 35. Their two children, Mike and Karen, are 11 and 9.

Were either one to die, they estimate that the remaining family members would need about 75% of the present combined take-home pay to retain their current standard of living while the children are still dependent. This does not include an extra $400/month in child-care expenses that would be required in a single-parent household. They estimate that survivors' benefits would total about $1,200 per month in child support.

Both Tom and Sue are knowledgeable investors. In the past, average after-tax returns on their investment portfolio have exceeded the rate of inflation by about 3%.

1.If Sue Wright was to die today, how much would the Wrights need in the family maintenance fund? Use the "needs approach" and explain the reasons behind your calculations.
2.Suppose the Wrights found that both Tom and Sue had a life insurance protection gap of $50,000. Present the steps in sequence how Wrights should proceed to search for protection to close that gap?

http://www.jiskha.com/search/index.cgi?query=Tom+Wright+are+assistant+professors+

Considering that this is a simple math problem, to make this really easy (without me answering if for you) you can use a website that will do this computation for you! A site that will do that computation for term life insurance quotes is TermMonster(calculator) next to coverage amount. Most of the sites out there require personal information like phone number etc. to get the information, the prior link DOES NOT! Simply click on the calculator next to "coverage amount" and that will give you all the information you need! Afterwards you can even run a quote assuming good health and see how much the coverage would cost them from different carriers. Best of luck!

1. To calculate the amount needed in the family maintenance fund if Sue Wright were to die today, we will use the "needs approach" which takes into account the estimated future needs of the family.

First, we need to determine the present combined take-home pay of Sue and Tom. We know that both Sue and Tom take home about $42,000 per year after taxes. Therefore, their present combined take-home pay is $42,000 + $42,000 = $84,000 per year.

Next, we need to determine the percentage of the present combined take-home pay that the remaining family members would need to retain their current standard of living while the children are still dependent. According to the information provided, this percentage is 75%.

To calculate the annual amount needed in the family maintenance fund, we multiply the present combined take-home pay by the percentage needed: $84,000 * 0.75 = $63,000.

However, we also need to consider the additional $400/month in child-care expenses that would be required in a single-parent household. To convert this into an annual expense, we multiply $400 by 12 months: $400 * 12 = $4,800.

So, the total annual amount needed in the family maintenance fund, if Sue Wright were to die today, would be $63,000 + $4,800 = $67,800.

2. To close the life insurance protection gap of $50,000 for both Tom and Sue, the Wrights can follow the following steps:

Step 1: Assess the current life insurance coverage - Evaluate the existing life insurance policies that Tom and Sue currently have to determine the total amount of coverage they already have in place.

Step 2: Calculate the remaining protection gap - Determine the difference between the existing life insurance coverage and the desired coverage amount ($50,000 in this case) to identify the remaining protection gap that needs to be closed.

Step 3: Research life insurance options - Look for life insurance policies that offer coverage options and benefits that match the family's needs. Consider factors such as the type of insurance (e.g., term or permanent), coverage amount, premium affordability, and length of coverage.

Step 4: Compare quotes and providers - Request quotes from multiple insurance providers to compare the coverage options, premiums, and policy terms they offer. Make sure to review the financial stability and reputation of the insurance companies.

Step 5: Consult with an insurance agent or financial advisor - Seek guidance from an insurance agent or financial advisor who can help analyze the available options and suggest the most suitable policies to cover the protection gap. They can also provide insights into the terms and conditions of the policies, ensuring that they align with the Wrights' financial goals.

Step 6: Apply for the selected policy - Once a suitable life insurance policy has been identified, complete the application process by submitting the necessary documentation and paying the premium.

Step 7: Review coverage regularly - Regularly review the life insurance coverage, especially when significant life events occur, such as the birth of another child or changes in income or expenses. This ensures that the coverage remains adequate to meet the family's needs over time.