Question

You are a dual income, no kids family. You and your spouse have the following debts (total): mortgage, $200,000; auto loan, $9600; credit card balance, $2200; and personal debts of $5300. Further, you estimate that your funeral will cost $4400. Your spouse expects to continue to work after your death. Using the DINK method, what does your life insurance need?

Answer 1

The life insurance need is $112950

Solution:

Given that,

Mortgage = $\ 200000$

Auto loan = $\ 9600$

Credit card balance = $\ 2200$

Personal debts = $\ 5300$

Funeral expenses = $\ 4400$

To find the life insurance needs using DINK method, we have use the following formula,

$\Rightarrow\text { funeral expensss }+\left[\frac{1}{2} \times \text { (mortgage }+\text { auto loan }+\text { credit card balance }+\text { other debts }\right]$

On substituting the values we get,

$\Rightarrow4400+\frac{1}{2}\times(200000+9600+2200+5300)=4400+\frac{1}{2}\times217100$

$\Rightarrow4400+\frac{217100}{2}=4400+108550=112950$

The term DINK stands for Double Income, No Kids. This method has you adding half of all your debts plus funeral expenses.