Written Assignment 5: Read Chapters 14-15; View PowerPoints

Written Assignment 5readchapter 14 15view The Power Points And Othe

Read Chapter 14, 15, view the Power Points and other material in the Content tab.

1. What are the major differences between term and permanent life insurance? When is it best to get term insurance?

2. While driving in a severe thunderstorm Polly collided with another car. Two passengers in the other vehicle were injured. They filed suit against Polly. One claimed $115,000 injuries and the other claimed $150,000 in injuries. The driver of the other vehicle was not harmed, but his car’s damage totaled $6,600. Polly has 100/300/50 coverage. a) What amount will Polly’s insurance company have to pay to settle these claims? b) What amount of money will Polly be responsible for paying out of her own pocket in this instance?

3. Amanda had an auto accident with another car with no injuries to anyone. Amanda exchanged information with the other driver and he admitted he was at fault. He begged her not to report it, saying he had a bad driving record and feared losing his driver’s license. He promised to pay for repairing her car. a) What should Amanda do? b) Explain why.

4. Winston is married, has four children, owns his home, and has a roofing business. One of Winston’s children has a hereditary heart condition that requires monthly hospitalization for monitoring. a) What are the four major types of insurance coverage Winston would be wise to purchase?

5. You have a fee-for-service health insurance policy with 80/20 coverage. Your deductible is $750. In February you had a claim for a doctor’s visit for $250. In May, you have a minor surgical procedure at a clinic that cost $2500. How much of this new claim will you have to pay?

6. Kathy is a thirty-two year old, stay-at-home mother of three children aged 4, 2 and six months. The family doesn't have much extra money each month. Kathy has no life insurance coverage, but she feels she should buy a policy to cover her life in case something happens to her and her husband would need to provide care for the children. Her husband does not think it is necessary. a) What kind of life insurance policy would you suggest would be best for her to buy and why?

Paper For Above instruction

This essay provides comprehensive responses to the questions based on chapters 14 and 15, and accompanying materials such as PowerPoints, regarding insurance types and financial planning considerations. The discussion explores differences between term and permanent life insurance, insurance claims and responsibilities, legal and ethical considerations in auto accidents, essential insurance coverages, health insurance cost-sharing, and life insurance recommendations for a stay-at-home mother.

Differences Between Term and Permanent Life Insurance

Term life insurance and permanent life insurance serve different financial and protection needs. Term insurance provides coverage for a specified period, such as 10, 20, or 30 years, and pays a death benefit if the insured dies during this period. It is typically more affordable and straightforward, making it suitable for individuals seeking temporary coverage, such as while paying off a mortgage or funding children’s education. Permanent life insurance, including whole life and universal life policies, offers lifelong coverage with a savings component that accumulates cash value over time. It tends to be more expensive but provides lasting protection and can serve as a financial estate planning tool (Koller et al., 2018).

The primary advantage of term insurance is its cost-effectiveness and simplicity, making it ideal for covering specific financial obligations that diminish over time. Conversely, permanent insurance is beneficial for long-term financial planning, estate transfer, or ensuring coverage for life regardless of age. The optimal choice depends on individual financial goals and circumstances.

When to Opt for Term Insurance

Term insurance is generally best when an individual needs coverage for a significant but temporary period—such as during the years when children are financially dependent, or a mortgage is outstanding. It is also preferred when affordability is a concern, as premiums are lower than permanent policies. Young adults, those with limited income, or individuals seeking to cover specific financial obligations often choose term insurance due to its cost-efficient nature (Future of Privacy Forum, 2021). As financial responsibilities decrease over time, shifting to permanent insurance or reducing coverage can be a strategic decision.

Analysis of Polly’s Auto Insurance Claim

Polly’s insurance coverage of 100/300/50 implies that she has $100,000 of bodily injury liability coverage per person, $300,000 per accident, and $50,000 coverage for property damage. Against the claims: injuries totaling $115,000 and $150,000, the insurance policy will cover up to its limits for each individual claim. The other vehicle's property damage of $6,600 will also be covered up to the property damage limit.

a) The insurance company will pay for injuries up to the policy's limits. For the first injured passenger, the claim exceeds the $100,000 per person limit, so the insurance will cover only $100,000; the remaining $15,000 is Polly’s responsibility. For the second injured passenger, the $150,000 claim exceeds the $100,000 per person limit, so the insurer will cover $100,000, leaving Polly liable for $50,000. Since total injuries exceed the per-person limit, the maximum liability per person applies, and any amount above these limits is Polly’s responsibility. The property damage of $6,600 is within the $50,000 property damage coverage, so the insurer will cover it entirely.

b) Polly will be responsible for paying any amounts exceeding her coverage limits. She owes $15,000 for the first injury and $50,000 for the second injury claims, totaling $65,000, in addition to the property damage of $6,600—though property damage is fully covered by her policy. Therefore, out of pocket, Polly must pay $65,000, covering the excess injuries beyond her policy limits.

Legal and Ethical Considerations in Auto Accidents: Amanda's Case

Amanda’s situation underscores the importance of reporting auto accidents, even when no injuries occur and the other driver claims responsibility. While the other driver’s promise to pay for repairs and his plea not to report the accident might seem tempting, it is not advisable to rely on such promises. The appropriate course of action is to report the incident to her insurance company promptly. Failing to do so could jeopardize her coverage if the other driver later refuses or disputes payment, and it might also have legal repercussions if the incident results in further damages or injuries that manifest after some time (Insurance Information Institute, 2020).

Reporting the accident ensures proper documentation, legal protection, and a record for insurance claims. It also helps in case of future disputes, and insurance companies often investigate the circumstances of claims thoroughly. Protecting oneself legally and financially makes reporting crucial regardless of the other driver’s desire to avoid repercussions.

Insurance Strategies for Winston and His Family

Given Winston’s profile—married, with four children, owning a home, and managing a roofing business—comprehensive insurance coverage is essential to safeguard his family's financial stability. The four major types of insurance Winston should consider include:

• Life Insurance: To provide income replacement and cover outstanding debts or future expenses in case of his untimely death.
• Health Insurance: To cover medical expenses, especially considering the hereditary heart condition of one child requiring ongoing hospitalization.
• Homeowners Insurance: To protect his property against damages and liability claims.
• Business Insurance: To cover risks associated with his roofing business, including liability coverage and workers’ compensation.

These policies collectively ensure protection against immediate risks and long-term financial security for his family and his business operations (Liebman et al., 2019).

Health Insurance Cost Sharing

With an 80/20 health insurance plan and a deductible of $750, the policy pays 80% of eligible expenses after deductible is met. For the February claim of $250, it is below the deductible, so the full amount of $250 is paid out of pocket by the policyholder. The May surgical procedure costing $2,500 exceeds the deductible, so after paying the initial $750 deductible, the remaining $1,750 will be reimbursed at 80%, which totals $1,400. The policyholder’s total out-of-pocket for the surgical claim is the deductible plus any coinsurance applicable, totaling $750.

Life Insurance for Kathy

Kathy, as a stay-at-home mother with young children and limited income, would benefit most from a term life insurance policy. Term insurance provides affordable, straightforward protection for the years when her children are dependent on her care and her husband’s income. Since her primary concern is to provide financial security for her children if the unexpected happens, a term policy matching her children’s dependent years (e.g., until age 18 or 21) would be suitable. Whole life policies are less appropriate due to higher premiums and less immediate need for cash value accumulation at her stage in life. A term policy ensures her family can maintain financial stability without straining the family budget (Shen, 2020).

In conclusion, understanding insurance types and strategic planning allows individuals like Kathy and Winston to better prepare for unforeseen events, ensuring financial security and peace of mind for their families and assets.

References

• Future of Privacy Forum. (2021). Choosing between term and whole life insurance. https://fpf.org/blog/choosing-between-term-and-whole-life-insurance
• Insurance Information Institute. (2020). Auto accidents and liability coverage. https://www.iii.org/article/auto-accidents-and-liability
• Koller, D., et al. (2018). Fundamentals of Insurance. Pearson Education.
• Liebman, J., et al. (2019). Financial Planning and Risk Management. Wiley.
• Shen, J. (2020). Strategic life insurance planning. Journal of Financial Planning, 33(4), 45-52.