Joe and Lisa White are a married couple. Joe is 63 and Lisa is 61. Joe is thinking about retiring in a few years, and the Whites have come to you for an insurance evaluation. Lisa plans to continue working even after Joe retires. The following provides a summary of the Whites’ insurance planning situation.
Life Insurance
Joe owns a $500,000 universal life insurance policy. Joe is the insured and their son David, age 37, is the beneficiary. The policy has a cash value of $50,000 and a living benefits provision; all account earnings are used to offset premium expenses. Lisa owns a 20 year $350,000 level term life policy that she purchased five years ago. She pays approximately $1,000 per year in premium costs. Lisa is the insured and Joe is the beneficiary.
Property and casualty insurance
Joe and Lisa own a home as JTWROS. The home has a market and replacement value of $675,000. The house is insured with the standard HO-3 policy for $550,000. The policy requires that the Whites pay a $500 deductible per claim occurrence. Other provisions include the following:
10% coverage on detached structures
Coverage up to $250 for cash
Coverage up to $1,500 for collectibles, artwork, and similar assets
Personal property contents coverage equal to 20% of the insured dwelling
Living expenses coverage for six months
Coverage up to $100,000 for personal liability
A replacement cost coverage endorsement is in place
The Whites’ two cars are insured under a personal automobile policy with split limit coverage of 250,000/500,000/50,000. They also have a $1 million excess liability policy.
Health insurance
The Whites are covered under Lisa’s group health insurance plan. The traditional plan has a lifetime maximum benefit equal to $5 million for the family, a $500 per person deductible, and an 80% coinsurance clause, with the family stop-loss limit of $2,500.
Using this information, please answer the following questions.
1. In preparation for retirement, Joe is exploring his Social Security and Medicare insurance coverage. He is concerned about whether or not the following benefits would be covered by Medicare:
1A. Hospice benefits for terminally ill persons.
1B. A stop-loss limit for annual medical expenses in excess of $2,500.
1C. Coverage for custodial care.
1D. Coverage for nonprescription drugs.
If Joe retires next year, would he receive any of the above benefits? What benefits should he expect to receive from Medicare?
What advice would you give Joe concerning health care costs in retirement?
2. Joe is considering purchasing a 15-year-old pickup truck for use when he goes hunting. The truck that he has his eye on has 100,000 miles but is in generally good condition.
What advice would you give Joe concerning insurance for this truck? Should he include: liability coverage? Medical payments coverage? Uninsured motorist coverage? Comprehensive? Collision? Justify each option.
Which of the following insurance coverage’s should Joe probably exclude when purchasing an insurance policy for this truck? Justify your answer.
2A. Liability coverage.
2B. Medical payments coverage.
2C. Uninsured motorist coverage
2D. Damage to insured’s auto coverage.