After reviewing the case and taking into consideration the after-tax income of Bill ($77,000 approx.) and
Kathy ($97000 approx.) and expenses.
Bill and Kathy Collins might need insurance for the following reasons:
1) To replace lost income in the event of a disability:)
If either Bill or Kathy were to become disabled and unable to work, they would lose a significant portion
of their income. As a result, they would likely have difficulty maintaining their current standard of living.
As per the case provided its mentioned that Bill has Short Term Disability Insurance provided by his
employer. But I would suggest Long Term Disability Insurance since he is a mechanic and may suffer a
serious injury. The coverage for Bill would be $65000 per year with a monthly benefit of $5375. Since
Kathy does not have any disability insurance, I would suggest the same as Bill. Her coverage would be
$85000 per year with a monthly benefit of $7150. The premiums for Bill and Kathy would be around $95
and $120 per month. Disability insurance would help to replace a portion of their lost income and would
allow them to maintain their current standard of living despite a disability.
2) To help pay for education and mortgage costs:
Bill and Kathy are planning to have children they will likely need help paying for their education. There
are 2 types of insurance for this situation, which is Whole Life and Universal Life Insurance, but I will
recommend Joint Whole Life Insurance. Whole life insurance policies have a cash value that increases
over time and the cash value accumulated can be spend on their children’s education. Furthermore, a loan
can also be taken from the policy to fund their children’s education. The coverage I recommend will be
$500,000. They may also need help paying off their mortgage. I would once again suggest Whole Life
Insurance due to its cash value which increases and accumulates over time. The policy coverage I
recommend would be $350000 for the couple. The death benefit from Whole Life Insurance policy could
be used to pay off the mortgage or to help pay for education costs.
3) To help pay for final expenses:
When a person dies, their loved ones are often left with the responsibility of paying for their final
expenses, such as funeral costs. Funeral Costs are quite high at present ranging from $5000 to $20000.
Bill has spousal insurance which will cover the cost when he passes away. But Kathy doesn’t have any
insurance so I would recommend Term Life Insurance of 40 years which would pay if the person passed
away and this policy will help to cover the funeral costs such as burial plot, flowers, coffin etc. The
Policy coverage I recommend for Kathy would be $50000 which will have a monthly premium cost of
$50
4) To help pay for other expenses:
There are many other expenses that Bill and Kathy may incur over the course of their lives. For example,
they may need help paying for medical expenses, or if they plan to a new car. Joint Whole life
(Participating) Insurance can help to pay for these types of expenses. The dividends received can be
cashed out to pay for the expenses. I would recommend a $50000 Joint Whole Life Insurance which will
have a monthly premium cost of $50.
