Calculate Matt’s life insurance need using the family need method

Matt and Mallory Bach, both age 32, are married with two sons. Silas is 6 and Cash is 4. Matt is a real estate property manager earning $60,000 per year. Mallory is a yoga instructor earning $40,000 per year. Based on the following facts and ignoring inflation and investment returns, calculate Matt’s life insurance need using the family need method. 

  • The Rowes want to be able to replace 80% of income for the deceased spouse until the youngest child reaches age 18 .
  • The Rowes estimate funeral costs and final expenses to be $20,000 for either of their untimely deaths.
  • The Rowes want to establish an education fund for each child in the amount of $100,000.
  • Matt estimates his wife would need half of his annual income as an additional resource to help her through a 6-month readjustment period.
  • The Rowes would like an emergency fund equal to one year’s total family income. 
  • The Rowes are concerned about the stability of the Social Security system and want to ignore whatever amount Social Security would provide as a survivor benefit in determination of their life insurance needs. 
  • Matt’s employer provides group term life insurance in the amount of 2.5 times his salary. 
  • The Rowes’ current investments total $45,000. 
  • The Rowes’ debts are as follows:
    • Home mortgage balance: $120,000
    • Auto loan: $15,000
    • Credit card: $3,000
    • Mallory’s student loans: $14,000
    • Matt’s student loans: $16,000
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