PFI/PFP: Introduction to Personal Finance Unit 7 Project

PFI/PFP: Introduction to Personal Finance

Unit 7 Project

Learning Goals:

Identify types of risk and determine appropriate strategies for assessing and managing these risks Understand the role of insurance in protecting human, financial, and property assets.Identify and be familiar with the most basic estate planning documents Max and Sarah Smith are a married couple. They are both 30 years old and they have a 3-year-old girl. Max is a loan officer and earns $55,000 a year. Sarah works as a retail store manager and earns $50,000 a year. Max's life expectancy is 80 years and Sarah's is 82. They plan on retiring when they are 65. There are three health insurance policies that they could choose from (see attached).

Health Insurance:

Help Max and Sarah to determine which of the three plans 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. Help the Smiths determine how much of their risk they should transfer and how much they should retain (for example a higher deductible means they are retaining more risk).Low Medical Expenses (~$2,500/year) High Medial Expenses (~$25,000/year) Estimated

Medical Cost:

FirstCare BronzeFirstCare Gold Blue Choice Gold FirstCare Bronze FirstCare Gold Blue Choice Gold Out of Pocket

Expenses:

$2,500 $500 $2,500 $12,700 $5,000 $5,400

Annual

Premium:

$2,519.64 $3,255.12 $4,004.28 $2,519.64$3,255.12 $4,004.28

Total Cost: $5,019.64 $3,7255.12 $6,504.28$15,219.64$8,255.12 $9,404.28

Which plan should they choose? And Why?The Smith family should purchase the FirstCare Gold Health Insurance Plan. Reasoning behind this choice include overall lower total cost based on their estimations of $2,500 and $25,000 in medical expenses. With a young family raising a child, doctor visit will be regular, and this plan protects them in the event of serious illness. With this plan, the Smith family retains less risk and saves more money based on their medical cost estimations.Now suppose you are choosing the insurance for yourself. Based on your own situation, what is your annual medical cost and which insurance are you going to choose based on your family, history, lifestyle, etc.? Why?

• Based on my current lifestyle and history, I would purchase the FirstCare Bronze Health Insurance Plan.

Reasoning behind this choice is that the annual premium is $735.48 cheaper than the FirstCare Gold Plan. The cost of visiting the doctor’s office, based on my history of illness, is roughly $150. Therefore, I could have a lower monthly premium and visit the doctor roughly 5 more times, which would still be cheaper than FirstCare Gold Plan.

Life Insurance:

What type of life insurances should the Smiths get? □ Term Life Insurance□ Cash-value Whole Life Insurance □ None

Explain your reasoning with evidence from the course materials:

oFor a young and growing family, Term Life Insurance provides guaranteed funds for a period of years. On a 20, 30-year term, this plan provides the family with a blanket of security incase of an unfortunate accident. The Term Life Insurance is also much cheaper than the annual premium cost of Cash-value Whole Life Insurance. I would This study source was downloaded by 100000828331062 from CourseHero.com on 07-29-2021 13:34:46 GMT -05:00

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recommend both Max and Sarah purchase Term Life Insurance based upon their age, annual income, and need to take care of a young child.

Disability Insurance:

What type of disability insurance should the Smiths get?Disability Insurance Coverage for Max: □ Short Term □ Long Term □ None Disability Insurance Coverage for Sarah: □ Short Term □ Long Term □ None oBased on their annual income, age, and low risk factors, the Smith family should purchase Short Term Disability Insurance. Both Max and Sarah should purchase Short Term. They will need money to continue paying their monthly bills and providing a stable life for their three-year-old.

Explain your reasoning with evidence from the course materials:

Long-Term Care Insurance:

Should the Smiths get long-term care insurance? □ Yes □ No oBased on their age and low risk factors, I believe Max and Sarah do not qualify for Long-Term Care Insurance.Funds could be utilized for debt reduction, savings, or other investments. When Max and Sarah reach an older age or deteriorating health, they should consider Long-Term Care Insurance.

Explain your reasoning with evidence from the course materials:

Deductibles and Cost Sharing In Network Out of Network Deductible (Individual)$4,500$0 Deductible (Family)$10,000 $0 Coinsurance30%$0 Out of Pocket Maximum (Individual) $6,350$0 Out of Pocket Maximum (Family) $12,700 $0 ServicesIn NetworkOut of Network Primary Care Visit $60$0 Specialist Visit$70 Copay after deductible $0 In Patient Hospital Services30% Coinsurance after deductible$0 Emergency Room Services $300 Copay after deductible$300 copay This study source was downloaded by 100000828331062 from CourseHero.com on 07-29-2021 13:34:47 GMT -05:00

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ServicesIn NetworkOut of Network Mental / Behavioral Health $70 copay$0 Imaging (CT/PET Scans, MRIs)30% coinsurance$0 Rehabilitative Speech Therapy$70 copay$0 Rehabilitative Occupational & Physical Therapy $70 copay$0 Preventative Care $0$0 Laboratory Outpatient and Professional Services $0$0 X-ray and Diagnostic Imaging30% coinsurance$0 Prescription Drugs In NetworkOut of Network Generic Rx$20 Copay after deductible Preferred Brand Rx $50 Copay after deductible Non Preferred Brand Rx $70 Copay after deductible Specialty Drugs30% Coinsurance after deductible Deductibles and Cost SharingIn Network Out of Network Deductible (Individual)$0$0 Deductible (Family)$0$0 Coinsurance20%$0 Out of Pocket Maximum (Individual) $6,350$0 Out of Pocket Maximum (Family)$12,700 $0 ServicesIn Network Out of Network Primary Care Visit$30$0 Specialist Visit$50$0 In Patient Hospital Services20%$0 Emergency Room Services$250$250 copay This study source was downloaded by 100000828331062 from CourseHero.com on 07-29-2021 13:34:47 GMT -05:00

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ServicesIn Network Out of Network Mental / Behavioral Health$50 copay $0 Imaging (CT/PET Scans, MRIs)20% coinsurance $0 Rehabilitative Speech Therapy$50 copay $0 Rehabilitative Occupational & Physical Therapy $50 copay $0 Preventative Care$0$0 Laboratory Outpatient and Professional Services $0$0 X-ray and Diagnostic Imaging$0$0 Prescription DrugsIn Network Out of Network Generic Rx$20 Preferred Brand Rx$50 Non Preferred Brand Rx$70 Specialty Drugs20?ductibles and Cost SharingIn Network Out of Network Deductible (Individual)$1,500$3,000 Deductible (Family)$4,500$9,000 Coinsurance20@% Out of Pocket Maximum (Individual) $3,500$7,000 Out of Pocket Maximum (Family)$10,500 $21,000 ServicesIn Network Out of Network Primary Care Visit$1040% coinsurance Specialist Visit$6040% coinsurance In Patient Hospital Services $200 Copay per Stay and 20% Coinsurance 40% coinsurance This study source was downloaded by 100000828331062 from CourseHero.com on 07-29-2021 13:34:47 GMT -05:00

https://www.coursehero.com/file/37109426/PFP-3301-Unit-7-Projectdocx/

This study resource was shared via CourseHero.com