Q8/

Costs associated with premature death

• First, the family’s share of the deceased breadwinner’s future earnings is lost forever.
• Second, death results in additional expenses such as funeral costs, uninsured medical bills, higher
childcare expenses, estate settlement costs, and other final expenses.
• Third, because of insufficient income, some families will experience a substantial reduction in their
standard of living.
• Finally, survivors face certain noneconomic costs such as intense grief, loss of a parental role model,
and counseling and guidance for the children.

Q9/
Human life value approach
Human life value can be defined as the present value of the family’s share of the deceased
breadwinner’s future earnings.

1. Estimate the individual’s average annual earnings over his or her productive lifetime.
2. Deduct federal and state income taxes, Social Security taxes, life and health insurance premiums, and
the costs of self-maintenance.
3. Determine the number of years from the person’s present age to the contemplated age of retirement.
4. Using a reasonable discount rate, determine the present value of the family’s share of earnings for the
period determined in Step 3.

Q10/

Calculate the present value of Julian's annual family support for 20 years: Present Value = Annual Family
Support x Present Value Factor
Present Value = $20,000 x $12.46
Present Value = $249,200
Julian will generate this income for 20 more years, so you need to multiply the present value by the
number of years he expects to generate this income:
Human Life Value = Present Value x Number of Years
Human Life Value = $249,200 x 20
Human Life Value = $4,984,000

Q11/
Funeral costs and uninsured medical bills: $10,000
Income support for her son: $2,000 monthly for 17 years
Total income needed = $2,000 * 12 months * 17 years = $408,000 Pay off the mortgage on her home:
$150,000
Pay off car loan and credit card debts: $15,000
College education fund for her son: $150,000
Now, let's add up these financial needs:
Total Financial Needs = $10,000 + $408,000 + $150,000 + $15,000 + $150,000 = $733,000
Next, let's calculate Kelly's existing financial assets:
Checking account: $2,000
Individual retirement account (IRA): $8,000
401(k) plan: $25,000
Individual life insurance: $25,000
Group life insurance: $90,000
Total Financial Assets = $2,000 + $8,000 + $25,000 + $25,000 + $90,000 = $150,000
Now, we need to determine the additional life insurance needed to cover the shortfall in Kelly's financial
needs. We'll subtract her total financial assets from her total financial needs:
Additional Life Insurance Needed = Total Financial Needs - Total Financial Assets
Additional Life Insurance Needed = $733,000 - $150,000 = $583,000

Q13/

The readjustment period is a one- or two-year period following the breadwinner’s death. During this
period, the family should receive approximately the same amount of income received while the family
head was alive. The purpose of the readjustment period is to give the family time to adjust its standard
of living.

Q14/
The dependency period extends until the youngest child in the family reaches the age of 18. During this
phase, the family should aim to receive income to provide for the financial needs of the surviving spouse
and children, especially when the surviving spouse may need to stay at home to care for the children

Q15/

Special needs
1- Mortgage Redemption Fund: This fund serves as a financial safety net to cover the ongoing housing
expenses, which may include monthly mortgage payments or rent.
2- Educational fund: The family head may want to provide an educational fund for the children.
3- Emergency fund: An unexpected event may occur that requires large amounts of cash, such as major
dental work, home repairs, or a new car
4- Mentally, emotionally, or physically challenged family members: Additional funds may be needed for
educating, training, and caring for children or adult family members who are mentally, emotionally, or
physically challenged.
5- Retirement Needs: Because the family head may survive until retirement, the need for adequate
retirement income should also be considered.

Q16/

1- Yearly renewable term insurance

It is a short-term life insurance policy that offers annual coverage with the option to renew each year.
Unlike traditional term life insurance, where the coverage period is typically 10, 20, or 30 years, YRT
policies are renewable on an annual basis. It may becomes expensive in the long run due to increasing
premiums.
2- (5-, 10-, 15-, 20-, 25-, or 30-year term)
Term insurance can also be issued for 5, 10, 15, 20, 25, or 30 years. The premiums paid during the term
period are level, but they increase when the policy is renewed.
3- Term to age
65
A term to age 65 policy provides protection to age 65, at which time the policy expires. The policy can be
converted to a permanent plan of insurance, but the decision to convert must be exercised before age
65.

4- Decreasing term
It is a type of life insurance policy where the death benefit or coverage amount gradually decreases over
the term of the policy. This type of insurance is designed for individuals who have specific financial
obligations that decrease over time, such as a mortgage or a loan.
5- Reentry term
It is a specific type of term life insurance that incorporates a unique feature known as reentry. This
feature allows policyholders to renew their term life insurance coverage for another term.
6- Return of premium term insurance
Return of Premium Term Insurance is a type of term life insurance that returns all the premiums paid
over the term if the policyholder survives the entire term. It combines the financial protection of life
insurance with a savings component, offering a way to recoup the premiums paid if no death benefit is
paid out. However, it typically comes with higher premiums compared to regular term life insurance.

Q17

Types of whole life insurance

• Ordinary life
• Limited-payment life
• Endowment insurance
• Variable life
• Universal life
• Variable universal life
• Current assumption whole life
• Indeterminate-premium whole life

Q18/
The Affordable Care Act (ACA) is a comprehensive reform law, enacted in 2010, that increases
health insurance coverage for the uninsured and implements reforms to the health insurance
market. It provides substantial subsidies to uninsured individuals and to small business firms and
contains numerous provisions to lower healthcare costs in the long run.

Q19/

From the perspective of uninsured individuals and family members, the Affordable Care Act has the
following advantages:
– Comprehensive benefits
– Dramatic reduction in the uninsured rate
– Subsidies for a large percentage of insureds
– Desirable economic benefits, such as avoidance of bankruptcy due to catastrophic medical bills

Individual Medical Expense Insurance (11 of 11) • The Affordable Care Act has the following
disadvantages:
– Horribly complex and an administrative nightmare – High premiums and deductibles
– No choice of individual benefits
– Relatively few insurers in Marketplace plans
– Politically unpopular

Q/20

Catastrophic plans cover, on average, less than 60 percent of the total average cost of care and are
available only to certain people