Q1: Complete this section of the assignment (computing disability income insurance needs) using the information presented below for John Warner: John Warner's annual after-tax income is $44,496. He would receive $1,120 monthly in Social Security disability benefits. He would receive employer-provided disability insurance benefits of $850 per month. John also has a private disability insurance plan that would provide him with $361 per month. He does not have any other monthly benefits from other government disability insurance. 1. Current monthly(not annual) after-tax income ($) 2. estimated SS disability benefit: 3. Employer provided disability benefit: 4. Monthly private disability insurance: 5. Other government disability insurance monthly benefit: 6. Total 2-5, then subtract from the monthly after tax income, this gives you your estimated income replacement needs. 7. Do you think you/John are adequately covered by disability insurance? Q2: Write a well-written discussion regarding the following statement: "A young person with no dependents might need more disability insurance than life insurance." Q3: Pages 366 in Chapter 12 provide an excellent decision-making worksheet and explanation designed to help you estimate your life insurance needs. Estimate your need for life insurance using the "Needs-Based Approach to Life Insurance," outlined in the worksheet questions listed below. This may seem cumbersome but you want to make sure that if you choose to have life insurance that you are covered adequately. If you have no dependents and have savings that will cover your final expense needs-you may choose not to have life insurance. If you are the sole provider and have minor children you may decide that life insurance is important for your situation. There are several types of life insurance also and premiums will vary. An advantage of selecting life insurance when you are young-the premiums are less. When you are older you may have little debt and no one depending on your income so you may adjust your policy accordingly. No matter what you choose, it's wise to know what you need, and read a policy to know what is included, if you don't you could wind up with an unpleasant surprise and not have the coverage you thought you did. The Needs-Based Approach to Life Insurance Step 1) Final-expense needs ($) Includes funeral, burial, travel, and other items of expense just prior to and after death. Step 2) Income-replacement needs ($) Multiply 75 percent of annual income* by the interest factor from Appendix Table A.4 (Present Value of a Stream of Equal Payments (an Annuity) of $1 per Period) found in the back of your textbook that corresponds with the number of years that the income is to be replaced and the assumed after-tax, after-inflation rate of return. *Seventy-five percent is used because about 25 percent of income is used for personal needs. Be sure to show all calculations and variables used including 75% of annual income X interest factor and the number of years used to estimate your income replacement needs and the assumed after-tax, afterinflation rate of return. Step 3: Readjustment-period needs ($) This covers employment interruptions, and possible education expenses for surviving spouse and dependents. Step 4: Debt-repayment needs ($) This provides repayment of short-term and installment debt, including credit cards and personal loans. Step 5: College-expense needs ($) To provide a fund to help meet college expenses of dependents. Step 6: Other special needs ($): List these special needs. Step 7: Subtotal ($) Add up the combined amounts from steps 1 - 6. Show all calculations. Step 8: Government benefits ($) Present value of Social Security survivor benefits and other benefits. Multiply monthly Social Security retirement benefit estimate by 12 and use Appendix Table A.4 (Present Value of a Stream of Equal Payments (an Annuity) of $1 per Period) found in the back of your textbook that corresponds with the number of years that the benefits will be received and the same interest rate that was used in Step 2 above. Again, be sure to show your calculation and variables used including monthly benefit estimate X 12 X number of years benefits will be received and the same rate of return you used in Step 2. Step 9: Current insurance assets ($) This is the amount of total life insurance coverage carried on you that would be available upon your death. Step 10: Life insurance needed ($) Subtract Step 8 and Step 9 from the subtotal in Step 7. Show all calculations. Q4: Once you have estimated the need for life insurance for you and/or your family, you must determinef the type of life insurance to cover those needs. There are basically two forms of life insurance available: term life insurance and cash-value life insurance. (Even if you have determined that you and/or your family do not need life insurance, you still need to answer this question.) Thoroughly compare and contrast term life insurance and cash-value insurance and the benefits offered by each form of insurance: Q5: Explain which types of life insurance or combination of types would be most effective in meeting your needs or the needs of your family for life insurance. Q6: Complete the questions below for you to provide a preliminary plan of who should be covered by what type of life insurance policy and for what amount. If you already are covered with life insurance policies, also include those policies and the amounts. Be specific about the types of policies planned or are already carried. For example, under term life there are many types of policies - guaranteed renewable, level-premium, decreasing term, etc. (In here, you will write about United HealthcareStudent resources-student insurance) Proposed and Existing Policies (describe all policies below): Q7: Reflect on what you determined to be your life insurance needs. After you have reviewed your coverage, do you feel adequately covered? Do you feel a need for life insurance coverage at all?