PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
6th Edition
ISBN: 9781337117005
Author: Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher: Cengage Learning
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Chapter 8, Problem 2FPE
Summary Introduction
To discuss: The kind of policy person E might purchase and the amount of total life insurance requirements.
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explain how you would position the applicable and needed insurance solutions to fit both the clients budget and needs for the following instances:
Winston and Neisha have been married for almost 40 years. Neisha is 60 and Winston is 63. Neisha works in HR with her present company and has $300,000 in retirement savings. Winston works for the state government which provides him a pension of $1,500 per month (100% transferrable to Neisha) and $200,000 in a 457b plan. They have no debt and full health care benefits through Winston. They will have $2,500 per month combined Social Security income, no debt, and monthly expenses of $5,000. They plan to retire when Winston is 65 years old.
Austin and Jenifer are both 35 years old with two (2) children ages 7 & 9. Austin works as an IT Manager with a medium-size firm and his salary is $120,000 annually. Jenifer stays at home with their children and works part-time earning approximately $10,000 to $15,000 a year. They had no other debt…
Choosing among types of life insurance. Camila Rodriguez, a 38-year-old widowed mother of three children (ages 12,10, and 4), works as a product analyst for a major consumer products company. Although she’s covered by a group life insurance policy at work, she feels, based on some rough calculations, that she needs additional protection. Leon Thompson, an insurance agent from Insurance Advisers, has been trying to persuade her to buy a $150,000, 25-year, limited payment whole life policy. However, Camila favors a variable life policy. To further complicate matters, Camila’s father feels that term life insurance is more suitable to the needs of her young family.
a. Explain to Camila the differences between (i) a whole life policy, (ii) a variable life policy, and (iii) a term life policy.
b. What are the major advantages and disadvantages of each type of policy?
c. In what way is a whole life policy superior to either a variable life or term life policy?In what way is a variable…
Tom and Tina are updating their financial plan and are concerned that they might not have enough life insurance coverage for their family, which includes two children, ages 4 and 10. They have determined that their annual income is $70,000 and their net worth is now $150,000. What is the amount of life insurance they should carry using the easy method?
Chapter 8 Solutions
PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
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- Martha and Louis Mitchell are a dual-career couple who just had their first child. Louis, age 30, already has a group life insurance policy, but Martha's employer does not offer a life insurance benefit. A financial planner is recommending that the 27- year-old Martha buy a $250,000 whole life policy with an annual premium of $1,670 (the policy has an assumed rate of earnings of 5 percent a year). Help Martha evaluate this advice and decide on an appropriate course of action .arrow_forwardTanner has a family and has chosen Plan C. Tanner has not used health insurance yet this year. Tanner goes to the hospital for some services and the bill is $1,000. How much of the bill will Tanner’s insurance pay?How much of the bill will Tanner payarrow_forwardMarie wants to provide retirement income for her dependent parents for 35 years should she die. Marie earns $67,500 and feels that her parents could live on 65% of that amount. If the insurance funds could be invested at 5%, how much life insurance does she purchase using the desired income method? Group of answer choices $1,273,499 $1,450,087 $932,743 $877,500arrow_forward
- The Baulding family has a basic health insurance plan that pays 80 percent of out-of-hospital expenses after a deductible of $250 per person. If three family members have doctor and prescription drug expenses of $984, $1,507, and $213 respectively, how much will the Baulding family and the insurance company each pay? How could they benefit from a flexible spending account established through Mr. Baulding's employer? What are the advantages and disadvantages of establishing such an account? The Baulding family will pay? The insurance company will pay? How could they benefit from a flexible spending account established through Mr. Baulding's employer? What are the advantages and disadvantages of establishing such an account?arrow_forwardNancy is a widow with two teenage children. Nancy's gross income is 54200 per month, and taxes take about 22% of her income. Using the income method, Nancy calculates she will need to purchase about eight times her disposable income in life insurance to meet her needs. How much insurance should Nancy purchase?arrow_forwardYour clients Aiden, 35, and Delora, 37, have had many life changes in the past year. Aiden secured a new job and a large raise. They welcomed their second child and now have two children under four years old. To accommodate the baby, they renovated and refinanced their existing mortgage. Delora will be a stay at home mom and no longer has group insurance coverage through her employer. They meet with you to discuss how these changes might impact their needs for insurance. Which of the following statements concerning Aiden and Delora's insurance needs is correct? a) The newborn child is a minor and will be covered under the existing coverage. b) Their insurance needs should not consider Delora since she is no longer earning an income under her stay at home mom status. c) The mortgage was refinanced and the bank would be responsible for providing mortgage insurance. d) Aiden may need additional coverage if his new employer offers less group life insurance than his previous…arrow_forward
- Mark and parveen are the parents of three young children. Mark is a store manger in a local supermarket. His gross salary is 75,000 per year. Parveen is a full time stay at home mom. Use the easy method to estimate the family’s life insurance needs.arrow_forwardMarthda and Louis Mitchell are a dual-career couple who just had their first child. Louis, age 30, already has a group life insurance policy, but Martha's employer does not offer a life insurance benefit. A finanical planner is recommending that the 27-year-old Martha buy a $250,000 whole life policy with an annual preminum of $1,670 (the policy has an assumed rate of earnings of 5 percent a year). Help Martha evaluate this advice and decide on an appropriate course of actionarrow_forwardHarvey Cook, 45, is a recently divorced father of two children, ages 10 and 7. He currently earns $95,000 a year as an operations manager for a utility company. The divorce settlement requires him to pay $1,500 a month in child support and $400 a month in alimony to his ex-wife. Harvey is now renting an apartment, and the divorce settlement left him with about $100,000 in savings and retirement benefits. His employer provides a $75,000 life insurance policy. Harvey’s ex-wife is currently the beneficiary listed on the policy. What advice would you give to Harvey? What factors should he consider in deciding whether to buy additional life insurance at this point in his life? If he does need additional life insurance, what type of policy or policies should he buy? Use Worksheet 8.1 to help answer these questions for Harvey.arrow_forward
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