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Life Insurance Policy

Jeff and Ann are both 28 years old. They have been married for three years, and they have a son who is almost two. They expect their second child in a few months.

Jeff is the head teller in a local bank. He has just received a $30-a-week raise. His income is $480 a week, which after taxes, leaves him with $1,648 a month. His company provides $20,000 of life insurance, a medical/hospital/surgical plan, and a major medical plan. All of these group plans protect him as long as he stays with the bank.

When Jeff received his raise, he decided that part of it should be used to add to his family's protection. Jeff and Ann talked to their insurance agent, who reviewed the insurance Jeff obtained through his job. Under Social Security, they also had some basic protection against the loss of Jeff's income if he became totally disabled or if he died before the children were 18.

But most of this protection was only basic, a kind of floor for Jeff and Ann to build on. For example, monthly Social Security payments to Ann would be approximately $1,250 if Jeff died leaving two children under age 18. Yet the family's total expenses will soon be higher after the birth of the second baby. Although the family's expenses would be lowered if Jeff died, they would be at least $250 a month more than Social Security would provide.

1 What type of policy would you suggest for Jeff and Ann? Why?
2 In your opinion do Jeff and Ann need additional insurance? Why or why not?

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Solution Preview

It just happens that I am actually a licensed insurance agent as well, so this is a pretty common scenario that I've seen. When it comes to life insurance, you have two types: Term and Whole. In a term life situation, Jeff could get a lot of coverage, for very cheap. Term tends to be a favorite of young families, where they would ...

Solution Summary

The solution provides an indepth answer to the question. The OTA is licensed in FL for this type of insurance, but the response is purely for academic purposes and should not be considered professional advice. Persons needing insurance advice are reccomended to speak with a local agent.