considering life insurance, it is necessary to take into account each of these family needs.
The immediate cash or "clean-up" fund is the amount of money needed to meet the immediate cash requirements of the deceased's estates. The need for such a fund is nearly universal in American society as funeral costs, medical expenses, outstanding debts and various other liabilities must be paid for from this or a similar fund.
Readjustment income is the amount of income needed to give the surviving spouse and children the time necessary tot readjust to their new financial level. Typically, the loss of one spouse results in a lower standard of living for the surviving family members, particularly in today's society where many families have two employed parents. The readjustment income is the amount of money that is necessary to tide the family over until the newer standard of living can be implemented.
The family income or dependency period fund is the money needed while children are dependent on the survivor for care and support. Typically, this is estimated to be the amount of time until the youngest child of the family reaches age 18. Ideally, this amount should include money for food, clothing, housing and medical care as well as items that are typically overlooked, such as transportation, insurance and inflation. Family income is typically calculated on a monthly basis.
The emergency fund provides funds for unforeseen events, including catastrophic illness or automobile accidents. If not used for emergency purposes, this fund can be put to use for other reasons.
The education fund is designed to provide for higher education for children; this is particularly important since the loss of one wage earner in the family can mean the elimination of higher education for children. When calculating the amount to be allocated to this fund, care should be given to estimate the increase in college fees at a level that accurate...