This case is updated or continued from the first case study in week 7.

Fiona and George ONeil have been married twenty-seven years and have three children

ages 6, 8, and 12. The ONeils think of themselves as a middle-class to above-average-

income family with typical educations for the three children. It is assumed that all three

will go to the state university, where tuition and other costs will be somewhat less than

for a private college and university.

Both Fiona and George are employed, but by different employers. Each spouse had a

gross income of approximately $40,000 last year. They are each covered by a group term

life insurance policy for the amount of their annual income. Each spouse has designated

the other spouse irrevocably as the primary beneficiaries, and the three children are

designated irrevocably as contingent beneficiaries.

In addition to the group term life insurance coverage, Fiona has a $60,000 universal life

policy on her life, and George has an $75,000 ordinary whole life policy on his life. The

two policies have the same beneficiary designations as the group term life insurance

coverages.

Fionaa employer provides Blue Cross/Blue Shield coverage for all employees and their

families under a group contract. Georges employer provides medical expense coverage

for al employees and their families under a group comprehensive major medical expense

insurance policy. Georges group comprehensive major medical expense coverage makes

use of a stop-loss clause to limit Georges out-of-pocket expenses, including the

deductible, to $5,000. Both employers offer the choice of either an HMO plan or a

preferred provider organization (PPO) plan to those employees and their families who

prefer either of these arrangements.

George has recently purchased an individual disability income policy that uses a split

definition of disability. The policy has both an elimination period and a probationary

period. The policy has the exclusions usually found in disability income policies, including

disability arising out of the insureds occupation. The policy has: (1) a presumptive

disability provision, (2) a residual disability benefit clause, and (3) a change of occupation

provision.

Although Fiona and George will not be eligible for Medicare benefits for another twenty

years, they are already considering how Medicare benefits can be integrated and

coordinated with their medical expense insurance coverage and how to deal with their

long-term care expenses that are likely to pose problems for them in their retirement

years.

Question I-1.

Assume that Georges comprehensive major medical policy provides an

initial deductible of $500 and an 80% coinsurance clause. How much will the insurer pay

for an appendectomy involving $1,500 of hospital board-and-room charges, a $700

surgical fee, $300 for the anesthetist, and $500 for miscellaneous hospital costs?

A.

$2,000

B.

$2,250

C.

$2,500

D.

$2,750

E.

$3,000

Question I-2.

Which of the following is the most likely wording of the split definition of

disability used in Georges disability income policy?

A.

Inability to perform any occupation, followed by inability to perform his or her own

occupation.

B.

Inability to perform any occupation for which qualified, followed by inability to

perform his or her own occupation.

C.

Inability to perform his or her own occupation, followed by inability to perform any

occupation for which reasonably suited.

D.

Inability to perform any occupation for two years, followed by inability to perform

any occupation for which reasonably suited.

E.

Presumed disability for two years because of the loss of two bodily members,

followed by inability to perform any occupation for which reasonably suited.

Question I-3.

Georges individual disability income policy has a presumptive disability

provision. Which of the following accidental injuries would usually entitle George to

receive disability income benefit under the presumptive disability provision of his

disability income policy?

(1) Fracture of one leg and one arm

(2) Loss of sight in both eyes

(3) Loss of one leg and one arm

A. (1) only

B. (3) only

C. (2) and (3) only

D. (1), (2), and (3)

E. Neither (1), (2), and (3)

Question I-4.

If they reach retirement age with no other sources of income, the option

most appropriate for Fiona and George to use for the cash values of their individual life

insurance policies would be which of following?

A.

Interest option

B.

Installment for a fixed option

C.

Installment for a fixed amount

D.

Joint and last survivor income option

E.

Additional paid-up insurance optio