Choose a current issue of Consumer Reports, Money, BusinessWeek, or Kiplinger’s Personal Finance and summarize an article that updates the costs of health care. How might you use this information to reduce your health care costs?
You and your spouse are in good health and have reasonably secure jobs. Each of you makes about $38,000 annually. You own a home with an $80,000 mortgage, and you owe $15,000 on car loans, $5,000 in personal debt, and $2,000 in credit card loans. You have no other debt. You have no plans to increase the size of your family in the near future. You estimate that funeral expenses will be $5,000. Estimate your total insurance needs using the DINK method.
Jake is a 27-year-old single man with no children. He has a younger sister who has a developmental disability. Both his parents are living, though neither parent is in good health. Jake has an auto loan, a $50,000 mortgage on his condominium, and no consumer debt. Is Jake a good candidate for life insurance? If so, what kind and how much life insurance should he buy?
Choose one stock and one mutual life insurance company. Obtain and compare premiums for, a. Term life insurance for $50,000, b. Whole life insurance for $50,000, c. Universal life insurance for $50,000. Prepare a summary table indicating which policy you would consider and why.
Renter’s Insurance:
Why is it important for people who rent to have insurance?
Does the building owner’s property insurance ever cover the tenant’s personal property?
What is the difference between cash value and replacement value?
When shopping for renter’s insurance, what coverage features should you look for?
Complete four of the following activities and write an essay describing what you found:
Survey friends and relatives to determine the types of insurance coverages they have. Also, ask them about the process they followed when selecting and comparing various insurance coverages.
Talk to a financial planner or an insurance agent about the financial difficulties faced by people who lack adequate home and auto insurance. What common coverages do many people overlook?
Survey several people about their household inventory methods. In the event of damage or loss, would they be able to prove the value of their personal property and other belongings?
Contact two or three insurance agents to obtain information about homeowner’s or renter’s insurance. Use Sheet 49 in the Personal Financial Planner to compare the coverages and costs.
Talk to several homeowners about the actions they take to reduce the cost of their homeowner’s insurance. Locate websites that offer information about reducing homeowner’s insurance costs. Prepare a video or other visual presentation to communicate your findings.
Conduct Web research or contact an insurance agent to determine the natural disasters that occur most frequently in your geographic area. What actions could a renter or homeowner take to reduce the financial risk of these natural disasters?
Contact two or three insurance agents to obtain information about automobile insurance. Use Sheet 50 in the Personal Financial Planner to compare costs and coverages for various insurance companies.
Evaluating Health Insurance Options: Ronald Roth started his new job as controller with Aerosystems today. Carole, the employee benefits clerk, gave Ronald a packet that contains information on the company’s health insurance options. Aerosystems offers its employees the choice between a private insurance company plan (Blue Cross/Blue Shield), an HMO, and a PPO. Ronald needs to review the packet and make a decision on which health care program fits his needs. The following is an overview of that information.
a. The monthly premium cost to Ronald for the Blue Cross/Blue Shield plan will be $42.32. For all doctor office visits, prescriptions, and major medical charges, Ronald will be responsible for 20 percent and the insurance company will cover 80 percent of covered charges. The annual deductible is $500.
b. The HMO is provided to employees free of charge. The copayment for doctors’ office visits and major medical charges is $10. Prescription copayments are $5. The HMO pays 100 percent after Ronald’s copayment. There is no annual deductible.
c. The POS requires that the employee pay $24.44 per month to supplement the cost of the program with the company’s payment. If Ron uses health care providers within the plan, he pays the copayments as described above for the HMO. He can also choose to use a health care provider out of the service and pay 20 percent of all charges after he pays a $500 deductible.
The POS will pay for 80 percent of those covered visits. There is no annual deductible.
Ronald decided to review his medical bills from the previous year to see what costs he had incurred and to help him evaluate his choices. He visited his general physician four times during the year at a cost of $125 for each visit. He also spent $65 and $89 on prescriptions during the year. Using these costs as an example, what would Ron pay for each of the plans described above? (For the purposes of the POS computation, assume that Ron visited a physician outside of the network plan. Assume he had his prescriptions filled at a network-approved pharmacy.
Questions:
What annual medical costs will Ronald pay using the sample medical expenses provided if he were to enroll in the Blue Cross/Blue Shield plan?
What total costs will Ronald pay if he enrolls in the HMO plan?
If Ronald selects the POS plan, what would annual medical costs be?
Life Insurance for Young Married People
Jeff and Ann are both 28 years old. They have been married for three years, and they have a son who is almost two. They expect their second child in a few months. Jeff is a teller in a local bank. He has just received a $60-a-week raise. His income is $960 a week, which, after taxes, leaves him with $3,200 a month. His company provides $50,000 of life insurance, a medical/hospital/surgical plan, and a major medical plan. All of these group plans protect him as long as he stays with the bank.
When Jeff received his raise, he decided that part of it should be used to add to his family’s protection. Jeff and Ann talked to their insurance agent, who reviewed the insurance Jeff obtained through his job. Under Social Security, they also had some basic protection against the loss of Jeff’s income if he became totally disabled or if he died before the children were 18. But most of this protection was only basic, a kind of floor for Jeff and Ann to build on. For example, monthly Social Security payments to Ann would be approximately $1,550 if Jeff died leaving two children under age 18. Yet the family’s total expenses would soon be higher after the birth of the second baby. Although the family’s expenses would be lowered if Jeff died, they would be at least $500 a month more than Social Security would provide.
Questions:
In your opinion, do Jeff and Ann need additional insurance? Why or why not?
What type of policy would you suggest for Jeff and Ann? Why?
Pages 6 Double spaced(1650 words)
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