https://ttu.blackboard.com/courses/1/201757-PFI-3301-D03/db/_2618471_1/embedded/Project%207%20Example%20Medical%20Expense%20Calculation%281%29.pdf

Nicky and Neal Johnson are a married couple. They are both 30 years old and they have a son (3 years old) and a daughter (1 years old). Neal is a banker and earns $50,000 a year. Nicky is a school teacher and earns $45,000 a year. They plan on retiring when they are 67. The Johnsons want your help determining how much risk they should transfer (insure), and how much they should retain (remember that a higher deductible, shorter term, longer waiting period, etc. all mean you are retaining more risk, which means you pay a lower premium).

Part A Health Insurance

Neal and Nicky have three health insurance policies to choose from (shown in the appendix at the end of this document). Help them determine which plan to choose. They want to know which plan would be best if they estimate their medical costs at approximately $2,500 per year and which plan to use if they estimate their medical costs closer to $60,000 per year. [13 points]

(Hint 1: Find out which one provides sufficient coverage at a reasonable cost.)

Plan Name:	First Care Bronze	First Care Gold	Blue Choice Gold	First Care Bronze	First Care Gold	Blue Choice Gold
Estimated Medical Cost:	Low Medical Expenses (~$2,500/year)			High Medial Expenses (~$60,000/year)
Out of Pocket Expense:
Annual Premium:
Total Cost:
Which plan should they choose? Why?

Based on your own situation, which plan would be best for you (based on your family, history, lifestyle, etc.)? Why? [2 points]

Part B Life Insurance

Based on the information from this course, what type of life insurance should the Johnsons get?

(Hint 2: Who does Life Insurance protect?) [2 points]

Term Life Insurance

Cash-value Whole Life Insurance

None

Explain your reasoning with evidence from the book and lectures. [3 points]

Part C Disability Insurance

Based on the information from this course, what type of disability insurance should the Johnsons get? (Hint 3: What does disability insurance cover?) [2 points]

Coverage for Neal:

Short Term Long Term Insurance

Coverage for Nicky:

Short Term Long Term Insurance

Explain your reasoning with evidence from the book and lectures. [3 points]

Part D Long-Term Care Insurance

Based on the information from this course, should the Johnsons get long-term care insurance?

(Hint 4: What age should someone start thinking about LTC insurance?) [2 points]

Yes

No

Explain your reasoning with evidence from the book and lectures. [3 points]

Appendix: Health Care Plan Information

Deductibles and Cost Sharing	In Network	Out of Network
Deductible (Individual)	$4,500	$0
Deductible (Family)	$9,000	$0
Coinsurance	30%	$0
Out of Pocket Maximum (Individual)	$6,350	$0
Out of Pocket Maximum (Family)	$10,500	$0

Deductibles and Cost Sharing	In Network	Out of Network
Deductible (Individual)	$0	$0
Deductible (Family)	$0	$0
Coinsurance	30%	$0
Out of Pocket Maximum (Individual)	$6,350	$0
Out of Pocket Maximum (Family)	$10,500	$0

Deductibles and Cost Sharing	In Network	Out of Network
Deductible (Individual)	$1,500	$3,000
Deductible (Family)	$4,500	$9,000
Coinsurance	20%	40%
Out of Pocket Maximum (Individual)	$3,500	$7,000
Out of Pocket Maximum (Family)	$12,500	$21,000