Valeria and Matias Rivera have been married for two years and have a 1-year-old son. They live in Richmond, Virginia, where Matias works for Software Solutions. He earns $6,000 per month, of which he takes home $4,200. Matias and his family are entitled to 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: Matias’ average monthly take home pay for the most recent year is equal to his current monthly take-home pay.) In case of complete disability, Matias would also be eligible for Social Security payments of $1,200 per month. 

Valeria is also employed. She earns $1,400 per month after taxes by working part-time at a nearby grocery store. As a part-time employee, the store gives her no benefits. Should Matias become disabled, Valeria would continue to work at her part-time job. If she became disabled, Social Security would provide monthly income of $700. Valeria and Matias spend 90 percent of their combined take home pay to meet their bills and provide for a variety of necessary items. They use the remaining 10 percent to fulfill their entertainment and savings goals.

1. How much, if any, additional disability income insurance does the Rivera family require to ensure adequate protection against Matias becoming completely disabled?

2. Does Valeria need any disability income coverage? Explain.

3. What specific recommendations regarding disability income insurance would you give Valeria and Matias to provide adequate protection for themselves and their child?