Suppose you are a typical family.Your annual income is $70,000.Use the income replacement method to determine your need for life insurance.Your insurance should be in the amount of (for 7 years)

Question

Quizplus · Accepted Answer

The income replacement method suggests that the life insurance should provide income replacement for a certain period of time. A common rule of thumb is 7 to 10 years. Therefore, in this case, the ideal life insurance benefit would be 7 times the annual income, which is $490,000. However, this amount may not be affordable or necessary in all cases. In this case, the closest answer is B, which is $344,000, and would provide income replacement for nearly 5 years. Therefore, B is the best choice.

Suppose You Are a Typical Family