Jim and Allison Smith are a married couple. They are both 38 years old and they have a son (17 years old) and a daughter (14 years old). Jim is an engineer and earns $95,000 a year. Allison is a school teacher and earns $30,000 a year. Jims life expectancy is 80 years and Allisons is 82. They plan on retiring when they are 67.

The Smiths 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., meaning you are retaining more risk, so you will pay a lower premium).

Information about policy costs can be found in the appendix at the end of the document.

Part A Health Insurance (Show your work in Part E)

The Smiths have three health insurance policies to choose from. 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 $25,000 per year.

(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 (~$25,000/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?

Part B Life Insurance

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

(Hint 2: Who does Life Insurance protect?)

Term Life Insurance

Cash-value Whole Life Insurance

None

Explain your reasoning with evidence from the book and lectures.

Part C Disability Insurance

Based on the information from this course, what type of disability insurance should the Smiths get? (Hint 3: What does disability insurance cover? Do NOT confuse this with long-term care insurance [see part D], they are 2 VERY different policies!)

Coverage for Jim:

Short Term

Long Term Insurance

None

Coverage for Allison:

Short Term

Long Term Insurance

None

Explain your reasoning with evidence from the book and lectures.

Part D Long-Term Care Insurance

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

(Hint 4: What does LTC insurance cover? What age should someone start thinking about LTC insurance?)

Yes

No

Explain your reasoning with evidence from the book and lectures.

Part E Calculations for Part A

First Care Bronze

Low Medical Expenses	High Medical Expenses

First Care Gold

Low Medical Expenses	High Medical Expenses

Blue Choice Gold

Low Medical Expenses	High Medical Expenses

Appendix: Health Care Plan Information

Deductibles and Cost Sharing	In Network	Out of Network
Deductible (Individual)	$4,500	$0
Deductible (Family)	$10,000	$0
Coinsurance	30%	$0
Out of Pocket Maximum (Individual)	$6,350	$0
Out of Pocket Maximum (Family)	$12,700	$0

Deductibles and Cost Sharing	In Network	Out of Network
Deductible (Individual)	$0	$0
Deductible (Family)	$0	$0
Coinsurance	20%	$0
Out of Pocket Maximum (Individual)	$6,350	$0
Out of Pocket Maximum (Family)	$12,700	$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)	$10,500	$21,000