decides to use the needs approach to determine how much life insurance to buy. Her cash needs are $30,000; her income needs are $140,000; and her special needs are $100,000. Ellen has the following assets: $20,000 in bank accounts, $30,000 in retirement accounts, and $40,000 in investment accounts. She does not own any individual life insurance, but she is covered by a $50,000 group life insurance policy through her employer. Judging solely from this information, how much additional life insurance (if any) should Ellen purchase

$130,000

Explanation:

For determining the additional life insurance required first we need to follow some steps which are shown below:-

Step 1

Total needs = Cash needs + Income needs + Special needs

= $30,000 + $140,000 + $100,000

= $270,000

Step 2

Total assets held = Bank accounts + Retirement plans + Investment accounts

= $20,000 + $30,000 + $40,000

= $90,000

Step 3

Total amount of life = $270,000 - $90,000

= $180,000

and finally

Additional life insurance required =

The Total amount of life - Life insurance provided by the employer

= $180,000 - $50,000

= $130,000

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