ACMA101 Introduction To Insurance

What is the after-tax income provided by Mikhail’s current individual disability coverage? What is the after-tax income provided by Molly’s coverage?

What is the total income before taxes the family can count on if Mikhail becomes disabled?  

What is the total after-tax income the family can count on if Mikhail becomes disabled? 

What is the additional disability insurance coverage required? 

Will Mikhail have to undergo a medical examination to obtain additional coverage?

Are there other types of disability insurance Mikhail should consider besides income replacement? If so, what?

Should the couple also consider purchasing disability income insurance for Molly in case she becomes disabled? Why or why not?

Which person in the couple would be a higher risk for determining disability insurance coverage? Why? 

Will the coverage suggested by the analysis (using the calculator) be sufficient to cover the couple’s needs? Why or why not? 

If the couple is interested in keeping their disability insurance premiums as low as possible, which approach should they favour, the income-based or expense-based approach? What is the recommended amount of coverage?

Read the following text regarding your new clients, Mikhail and Molly, and, using the Insureright.ca Disability Calculator when necessary, answer the questions that follow. If you use the calculator, you should cut and paste the image of the portion of the calculator that supports your answer. Your case study should be submitted in typed format. No handwritten responses!

Mikhail and Molly Monahan are both 35 years old. Mike, as his friends call him, earns $42,000 annually as a self-employed mechanic. He runs a garage with a partner and three employees. For her part, Molly works as a bookkeeper for a small accounting firm where she earns $36,000 per year. Molly has disability insurance coverage equal to 2/3 of her salary through her employer’s group insurance plan.  Mikhail has an individual disability insurance plan in the amount of $1,500/month which he purchased from you a few years ago. The plan includes a future purchase option. He has since married Molly and they now have a young child, so he would like you to review his disability insurance needs to make sure they have enough coverage. He and Molly have started saving for retirement and would like to continue to do so, even in the event that either becomes disabled.

They have provided a breakdown of their monthly expenses for you to analyze. They share expenses equally, with the exception of Molly’s personal loan, for which she is solely responsible, and the car lease and expenses. Mikhail is solely responsible for these.

Groceries: $600

Mortgage payment: $1,000

Property taxes: $300

Utilities: $200

Cell phones: $150

Internet: $100

Car lease: $300

Gas & maintenance: $150

Home insurance: $150

Molly’s loan: $100

Child care: $500

Clothing: $200

Gifts: $100

Entertainment: $200

Savings contributions: $500

Total Expenses: $4,550

They anticipate they would be in a 30% tax bracket when disabled.