Essay on finance

Words: 2819
Pages: 12

Continuing Case: Cory and Tisha Dumont

Part 3:
Protecting yourself with insurance



1. Using the earnings multiple approach would result in the following life insurance calculations for Cory and Tisha.
Cory’s needs = $38,000 x (1 – 0.22) x 12.46 = $369,314
Tisha's needs = $46,000 x (1 – 0.22) x 12.46 = $447,065
Cory currently has $76,000 (2 x $38,000) of term life insurance through his employer. Consequently, Cory should consider purchasing approximately $293,000 of additional life insurance coverage. Tisha has $69,000 of term insurance through her employer, as well as a whole life policy of $50,000. She should consider purchasing an additional $328,000 of life insurance coverage ($447,065 – $119,000). While Tisha or Cory
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Overall, their health care coverage is very cost effective, so no changes are recommended.


7. The Dumonts have four options for paying a $5,000 medical bill incurred through an auto accident, including payment by:
Health insurance.
Medical expense coverage with their auto insurance.
Bodily injury liability coverage on an auto policy, assuming someone else was at fault for the accident.
Personal funds, or out-of-pocket. These funds would supplement the health insurance coverage, or be the only source of payment, should the Dumonts not have health insurance. Luckily, they do.

Expenses for an emergency appendectomy would be covered through health insurance and personal funds. Assuming no one else has made a claim this year, Tisha’s health insurance would pay $3,600: the $5,000 medical bill minus the $500 deductible and the $900 of co-insurance (0.20 x $4,500). Tisha would be responsible for the $1,400 of deductible and co-pay expenses because the Dumonts’ out-of-pocket expenses for the year have not yet exceeded the $5,000 stop-loss limit.

8. Advantages for the Dumonts of switching to an HMO include: regular physical examinations and preventive care, minimized paperwork, and lower costs. Tisha may be able to reduce the $225 monthly premium charged for her current coverage. Disadvantages associated