1. How much, if any, additional disability income insurance does Luis require to ensure adequate protection against his becoming completely disabled? Use Worksheet 9.2 to assess his needs.
2. Does Dora need any disability income coverage? Explain.
3. What specific recommendations regarding disability income insurance would you give Luis and Dora to provide adequate protection for themselves and their child?
Luis Barillas and his wife, Dora, have been married for two years and have a 1-year-old son. They live in Charlotte, North Carolina, where Luis works for Advanced Marketing Analytics. He earns $3,200 per month, of which he takes home $2,300. Luis and his family are entitledto receive the benefits provided by the company's group health insurance policy. In addition to major-medical coverage, the policy provides a monthly disability income benefit amounting to 20 percent of the employee's average monthly take-home pay for the most recent 12 months prior to incurring the disability. (Note: Luis's average monthly take-home pay for the most recent year is equal to his current monthly take-home pay.) In case of complete disability, Luis would also be eligible for SocialSecurity payments of $700 per month. Dora is also employed. She earns $700 per month after taxes by working part-time at a nearbygrocery store. As a part-time employee, the store gives her no benefits. Should Luis becomedisabled, Dora would continue to work at her part-time job. If she became disabled, Social Securitywould provide monthly income of $400. Luis and Dora spend 90 percent of their combinedtake-home pay to meet their bills and provide for a variety of necessary items. They use the remaining10 percent to fulfill their entertainment and savings goals.