Case IV Frank and Julie Case

Any of irrelevant information to the question below, you can ignore from the description. This case is updated or continued from the first case study in week 7.

Frank

Age 35

Attorney for International Shipping Co.

Earns $75,000 annually

In good health Julie

Age 32

Administrative assistant for Action Staffing Resources

Earns $35,000 annually

In good health Frank and

Julie

Have been married for four years

Have one child, Robert, age 4

Would like to have another child within two years

Medium-to-high risk tolerance

Are not confident that Social Security will provide them with an adequate income upon retirement

Contribute to their alma mater's alumni fund

Travel annually on missionary trips to underprivileged countries Robert

Robert attends a day care center while his parents are at work. He has also done some television commercials for Fancy Pants, a high-end baby clothing company. Frank and Julie would like to send Robert to a state university upon graduation from high school. They would like to start saving for this expense within the next five years. Paul and Rose Golden Franks parents, Paul, age 58, and Rose, age 55, are both in good health. They plan to contribute to Roberts education and the college education of any other children that Frank and Julie may have in the future. They are financially secure and have adequate insurance coverage.

Harry and Alice Rich Julies father, Harry, age 68, was diagnosed with Alzheimers disease two years ago. He is confined to a nursing home. Alice, Julies mother, is 60 years old and is in good health.

Goals and Objectives

Retire in 20 years with retirement income equal to 80% of preretirement income

Begin an education fund for Robert (and any other children) within the next five years

Have enough life insurance upon the death of either Frank or Julie so that the mortgage is paid off, an adequate emergency fund is created, and the surviving spouse has $250,000 for any needs of the children

Frank and Julie have asked you to review both their insurance protection and overall financial situation.

Question IV-1.Considering the facts of the case, what recommendations would you make to the Goldens?

I. Purchase additional homeowners insurance

II. Purchase additional life insurance on both Frank and Julie

1. I only
2. II only
3. Both I and II
4. Neither I nor II

Question IV-2. Which of the following are deficiencies in the Goldens risk management plan?

1. The Goldens have inadequate dwelling coverage.

2. Julie is not covered by a disability policy.

3. The Goldens should consider adding endorsements to their homeowners policy.

1. 1 and 2
2. 1 and 3
3. 2 only
4. 1, 2, and 3

Question IV-3. Assume that the Goldens home, which has a replacement cost of $225,000, is damaged by fire. The replacement cost of the damaged section of the home is $20,000. The actual cash value of the part of the dwelling that was damaged was $12,000. How much will Homesafe Insurance Company pay for the loss?

1. $16,167
2. $12,000
3. $18,400
4. $20,000

Question IV-4. Would Harry meet the eligibility criteria benefits under most long-term care policies?

1. Yes, he is considered terminally ill.
2. No, he is not considered physically impaired.
3. No, his illness is not expected to result in death.
4. Yes, he requires substantial services to protect himself from threats to health and safety due to severe cognitive impairment.

Question IV-5. Julie purchases a disability income insurance policy, for which she and Frank pay all of the premiums. She is unable to work for several months due to an accident and receives $10,000 in disability benefits under her policy. Which of the following statements regarding the income tax treatment of the premiums and benefits of this policy is CORRECT?

1. The premiums are deductible and the benefits are taxable.
2. The premiums are deductible and the benefits are tax free.
3. The premiums are not deductible and the benefits are taxable.
4. The premiums are not deductible and the benefits are tax free.

Question IV-6. Julie is considering the purchase of an individual disability income insurance policy. She is especially concerned about being able to renew her coverage. Which of the following continuation provisions will provide Julie with the greatest security with respect to renewal?

1. Nonrenewable
2. Guaranteed renewable
3. Conditionally renewable
4. Noncancelable

Question IV-7. Harry is covered by Medicare Part B. He incurs $10,000 in medical bills for outpatient hospital services and doctors bills. How much will Medicare Part B pay toward these expenses, assuming Harry has satisfied the Part B deductible?

5. $0
6. $2,000
7. $8,000
8. $10,000

Question IV-8. This year, a burglar breaks into the Goldens house and steals their TV. The TV had a replacement cost of $750 and an actual cash value of $300. How much will their homeowners policy pay toward this loss?

1. $0
2. $250
3. $750
4. $300

Question IV-9. Which of the following government programs may pay for Harrys nursing home expenses, assuming he is indigent and requires only custodial care?

1. Medicaid
2. Medicare Part A
3. Medicare Part B
4. Medicare Part D