Optimal term life insurance - A practical solution

This paper aims to offer a reasonable, practical solution to the life insurance decision facing families with a single wage earner upon whom the remaining family members are dependent. The solution depends upon the individual's age, probability of dying, planning horizon, earnings, wealth, degree of risk aversion, and the social insurance that would be received by the family. It is shown that, under various realistic assumptions, although the essence of the problem is its multiperiod nature, the solution reduces to a sequence of single-period decisions.