Danny was a self-employed construction worker. In an accident, he fell from the roof of a building and injured seriously while working in a construction site. He stayed 45 days in a hospital for medical treatment, after which he stayed at home for another 60 days until full recovery to perform his job duties. During his 45-day hospital stay, he incurred the following expenses: room and board charges at $1,000 per day; surgeon fee of $80,000; physician fee of $20,000 and miscellaneous expenses of $8,000. Danny has a health insurance policy that has a $4,000 deductible and an 80-20 coinsurance clause. The policy provides disability income benefit of $500 per day with no waiting period. Danny wants to know more about life insurance policies for his wife and 3-year old son. He looks for a policy that provides flexibility in adjusting premiums and death benefits.

a. What are health insurance and disability income benefit?

b. Explain the policy provision related to deductible in the health insurance policy.

c. Calculate the TOTAL amount that insurance company will pay for the accident from BOTH health insurance policy and disability income benefit. Show your workings.

d. What is the type of life insurance policy that Danny should purchase? Explain your answer.

e. If Danny is totally disabled for a specified length of time, his life insurance premiums can be waived. Name this rider added in Danny’s life insurance policy.