Question

Problem 1

Julian, age 27, has two children, ages 4 and 3, from his first marriage. He is now married to Margaret. The children live with their mother, Alice. Julian and Margaret each make $26,000 per year and have recently bought a house for $100,000, with a $95,000 mortgage. They have the following life, health, and disability insurance coverage: Life Insurance

Policy A		Policy B		Policy C
Insured	Julian		Julian		Margaret
Face amount	$250,000		$78,000		$20,000
Type	20-year level term		Group term		Group term
Annual premium	$250		$156		$50
Premium payor	Trustee		Employer		Employer
Beneficiary	Trustee*		Alice		Julian
Policyowner	Trust		Julian		Margaret
*Children are beneficiaries of the trust required by divorce decree.

Health Insurance Julian and Margaret are covered under Julian’s employer plan, which is a PPO plan with a $500 in-network deductible per person per year and a $1,500 out-of-network deductible per person per year, an in-network 80/20 coinsurance clause with a family annual out-of-pocket maximum of $2,500, and an out-of-network 60/40 coinsurance clause with a family out-of-pocket maximum of $4,500.

Long-Term Disability Insurance Julian is covered by an own occupation policy, with premiums paid by his employer. The benefit equals 60% of his gross pay after a 180-day elimination period. The policy covers both sickness and accidents. The benefit period is five years (60 months). Margaret is not covered by disability insurance.

a. Assume that Julian dies. Who would receive the proceeds of the insurance policies?

b. Does Julian have adequate life insurance?

c. Is Julian’s health and disability coverage adequate? If not, why not?

d. Should Margaret have disability insurance? Why or why not?

e. Are any of the premiums or benefits received from the life, health, or disability insurance taxable to Julian and Margaret?

Answer 1

1. As recipients of the trust, Julian's kids would get the proceeds from Policy An, and his ex would get the proceeds from Policy B. In spite of the fact that they are divorced, she is the named recipient and the proceeds will go to her by activity of law.

2. No, Julian does not have satisfactory insurance since nothing will go to Margaret in the occasion he predeceases her.

3. Julian's medical coverage is satisfactory. The disability insurance may likewise not be satisfactory in light of the fact that his boss is paying premium, on the grounds that the advantages are taxable. 60% of gross pay scope may not be sufficient. Another issue that ought to be considered is 180 day disposal period. In the event that he doesn't have enough liquid assets to cover him until the finish of the end time frame, he may have monetary trouble.

4. Indeed, around 60% of her gross pay. Julian and Margaret win a similar wage and offer costs. In the event that she is incapacitated for quite a while, they may have money related troubles.

5. A segment of Julian's life coverage premiums that is paid by the business will be taxable in light of the fact that the advantage is over the $50,000 edge. Any advantages paid out from Julian's disability policy will likewise be taxable