Alex of Barstow, California, recently took a new job as a manufacturer’s representative for an aluminum castings company. While looking over his employee benefits materials, he discovered that his employer would provide 10 sick days per year, and he can accumulate these to a maximum of 60 sick days if any go unused in a given year. In addition, Alex’s employer provides a $2,000-per-month, short-term, one-year total disability policy. When he talked with the human resources office, Alex found that he might qualify for $1,100 per month in Social Security disability benefits if he became unable to work. Alex earns a base salary of $5,000 per month and expects to earn about $40,000 in commissions, for an average after-tax income of $7,000 per month. After considering this information, Alex became understandably concerned that a disability might destroy his financial future.

(a) What is the level of Alex’s short-term, one-year disability insurance needs?

(b) What is the level of Alex’s long-term disability insurance needs?

(c) Help Alex select from among the important disability insurance policy provisions to design a disability insurance program tailored to his needs.

Answer rating: 100% (QA)

a He should obtain a disability policy to cover his shortterm needs o... View the full answer