Project 7 – Risk Management
Instructions: Please complete this assignment and submit though Blackboard. You may consult with the
classmates/instructor at any time. Please be very thoughtful when you explain your decisi
...
Project 7 – Risk Management
Instructions: Please complete this assignment and submit though Blackboard. You may consult with the
classmates/instructor at any time. Please be very thoughtful when you explain your decisions.
Please show your work and your thought process.
Scenario
Eduardo and Lucia Ricardo are a married couple. They are both 39 years old and they have a
son (17 years old) and a daughter (14 years old). Eduardo is an engineer and earns $95,000 a
year. Lucia is a school teacher and earns $30,000 a year. Eduardo’s life expectancy is 80 years
and Lucia’s is 82. They plan on retiring when they are 67.
The Ricardos want your help determining how much risk they should transfer (insure), and how
much they should retain (remember that a higher deductible, shorter term, longer waiting period,
etc., means they are retaining more risk, so they will pay a lower premium).
Information about policy costs can be found in the appendix at the end of the document.
Part A – Health Insurance (Show your work in Part E)
1. The Ricardos have three health insurance policies to choose from. Help them determine which
plan to choose. They want to know which plan would be best if they estimate their medical
costs at approximately $4,000 per year and which plan to use if they estimate their medical
costs closer to $35,000 per year.
(Hint 1: Find out which one provides sufficient coverage at a reasonable cost.)
Plan Name:
First Care
Bronze
First Care
Gold
Blue Choice
Gold
First Care
Bronze
First Care
Gold
Blue Choice
Gold
Estimated
Medical
Cost:
Lower Medical Expenses
(~$4,000/year) High Medial Expenses (~$35,000/year)
Out of
Pocket
Expense:
$4,000 $4,000 $4,000 $12,700 $7,000 $10,500
Annual
Premium: $2,519.64 $3,259.44 $4,004.28 $2,519.64 $3,255.12 $4,004.28
Total Cost: $6,519.64 $7,259.44 $8,004.28 $15,219.64 $10,255.12 $14,504.28
Which plan
should they
choose?
Why?
First Care Gold Plan due to low total annual
cost
First Care Gold Plan due to low total annual
cost
2. Based on your own situation, which plan would be best for you (based on your family, history,
lifestyle, etc.)? Why? I would probably go with the First Care Gold Plan since it has
the lowest annual cost for the high expenses.
https://www.coursehero.com/file/31874049/Project-7-Insurance-Mikhayla-Smithpdf/
This study resource was
shared via CourseHero.comProject 7 – Risk Management
Instructions: Please complete this assignment and submit though Blackboard. You may consult with the
classmates/instructor at any time. Please be very thoughtful when you explain your decisions.
Please show your work and your thought process.
Part B – Life Insurance
3. Based on the information from this course, what type of life insurance should the Ricardos get?
(Hint 2: Who does life insurance protect? What does life insurance replace?)
☐ Term Life Insurance
ü Cash-value Whole Life Insurance
☐ None
Explain your reasoning with evidence from the book and lectures.
They would get the highest return.
Part C – Disability Insurance
4. Based on the information from this course, what type of disability insurance should the Ricardos
get?
(Hint 3: What does disability insurance cover? Do NOT confuse this with long-term care insurance
[see part D], they are 2 VERY different policies!)
Coverage for Eduardo:
☐ Short Term
ü Long Term Insurance
☐ None
Coverage for Lucia:
ü Short Term
☐ Long Term Insurance
☐ None
Explain your reasoning with evidence from the book and lectures.
Part D – Long-Term Care Insurance
5. Based on the information from this course, should the Ricardos get long-term care insurance?
(Hint 4: What does LTC insurance cover? What age should someone start thinking about LTC
insurance?)
ü Yes
☐ No
Explain your reasoning with evidence from the book and lectures.
https://www.coursehero.com/file/31874049/Project-7-Insurance-Mikhayla-Smithpdf/
This study resource was
shared via CourseHero.comProject 7 – Risk Management
Instructions: Please complete this assignment and submit though Blackboard. You may consult with the
classmates/instructor at any time. Please be very thoughtful when you explain your decisions.
Please show your work and your thought process.
Part E – Calculations for Part A
First Care Bronze
Low Medical Expenses High Medical Expenses
shared via CourseHero.comProject 7 – Risk Management
Instructions: Please complete this assignment and submit though Blackboard. You may consult with the
classmates/instructor at any time. Please be very thoughtful when you explain your decisions.
Please show your work and your thought process.
Appendix A: Health Care Plan Information
Deductibles and Cost Sharing In Network Out of Network
Deductible (Individual) $4,500 $0
Deductible (Family) $10,000 $0
Coinsurance 30% $0
Out of Pocket Maximum (Individual) $6,350 $0
Out of Pocket Maximum (Family) $12,700 $0
Deductibles and Cost Sharing In Network Out of Network
Deductible (Individual) $0 $0
Deductible (Family) $0 $0
Coinsurance 20% $0
Out of Pocket Maximum (Individual) $6,350 $0
Out of Pocket Maximum (Family) $12,700 $0
https://www.coursehero.com/file/31874049/Project-7-Insurance-Mikhayla-Smithpdf/
This study resource was
shared via CourseHero.comProject 7 – Risk Management
Instructions: Please complete this assignment and submit though Blackboard. You may consult with the
classmates/instructor at any time. Please be very thoughtful when you explain your decisions.
Please show your work and your thought process.
Deductibles and Cost Sharing In Network Out of Network
Appendix B: Life Insurance Information
Term Policy
Term: 20 years
Coverage: $1 million
Cost: $50 per month
Whole Life Policy
Term: Life
Coverage: $1 million
Cost: $750 per month
Appendix C: Other Relevant Information
ü The Ricardos have been regularly saving for retirement in their 401(k) and are on track for
retirement.
ü The Ricardos have a diversified investment account and several small Roth IRA accounts.
ü The Ricardos have a college savings account for each child. These accounts are on track to fully
fund 5 years of college when the children reach age 18.
ü The Ricardos have an emergency fund with 6 months of living expenses.
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