Texas Tech University - PFP 3301Unit 7 Project: Introduction to Personal Finance

Introduction to Personal Finance Unit 7 Project Learning Goals:  Identify types of risk and determine appropriate strategies for assessing and managing these risks  Understand the role of insurance in protecting hu ...

Introduction to Personal Finance Unit 7 Project Learning Goals:  Identify types of risk and determine appropriate strategies for assessing and managing these risks  Understand the role of insurance in protecting human, financial, and property assets.  Identify and be familiar with the most basic estate planning documents 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 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. There are three health insurance policies that they could choose from (see below). Health Insurance: Help Eduardo and Lucia to determine which of the three plans to choose. They want to know which plan would be best if they estimate their medical costs at approximately $4000 per year and which plan to use if they estimate their medical costs closer to $30,000 per year. Help the Ricardo’s determine how much of their risk they should transfer and how much they should retain (for example a higher deductible means they are retaining more risk). Low Medical Expenses (~$4,000/year) High Medial Expenses (~$30,000/year) Estimated Medical Cost: FirstCare Bronze FirstCare Gold Blue Choice Gold FirstCare Bronze FirstCare Gold Blue Choice Gold Out of Pocket Annual should they choose? And Why? First Care Gold plan due to low total annual cost First Care Gold plan due to low total annual cost Now suppose you are choosing the insurance for yourself. Based on your own situation, what is your annual medical cost and which insurance are you going to choose based on your family, history, lifestyle, etc.? Why? The plan I would use would be the Blue Choice Gold Plan because sometimes kids have to go to the doctor more often and I would be paying less out of pocket. Life Insurance:What type of life insurances the Ricardo’s get? □ Term Life Insurance □ Cash-Value Whole Life Insurance □ None Explain your reasoning with evidence from the course materials: They would get the highest return. Disability Insurance: What type of disability insurance should the Ricardo’s get? Disability Insurance Coverage for Eduardo: □ Short Term □ Long Term □ None Disability Insurance Coverage for Lucia: □ Short Term □ Long Term □ None Explain your reasoning with evidence from the course materials: Ricardo needs long term because he brings in the most income and Lucia needs short term because she brings in less income and the premiums will be cheaper. Long-Term Care Insurance: Should the Ricardo’s s get long-term care insurance? □ Yes □ No Explain your reasoning with evidence from the course materials: Yes because from the lectures I believe the age for long term insurance is 40 so he should choose the long term insurance plan until he is 40. 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 Services In Network Out of Network Primary Care Visit $60 $0 Specialist Visit $70 Copay after deductible $0 In Patient Hospital Services 30% Coinsurance after deductible $0Services In Network Out of Network Emergency Room Services $300 Copay after deductible $300 copay Mental / Behavioral Health $70 copay $0 Imaging (CT/PET Scans, MRIs) 30% coinsurance $0 Rehabilitative Speech Therapy $70 copay $0 Rehabilitative Occupational & Physical Therapy $70 copay $0 Preventative Care $0 $0 Laboratory Outpatient and Professional Services $0 $0 X-ray and Diagnostic Imaging 30% coinsurance $0 Prescription Drugs In Network Out of Network Generic Rx $20 Copay after deductible Preferred Brand Rx $50 Copay after deductible Non Preferred Brand Rx $70 Copay after deductible Specialty Drugs 30% Coinsurance after deductible 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 Services In Network Out of Network Primary Care Visit $30 $0 Specialist Visit $50 $0 In Patient Hospital Services 20% $0Services In Network Out of Network Emergency Room Services $250 $250 copay Mental / Behavioral Health $50 copay $0 Imaging (CT/PET Scans, MRIs) 20% coinsurance $0 Rehabilitative Speech Therapy $50 copay $0 Rehabilitative Occupational & Physical Therapy $50 copay $0 Preventative Care $0 $0 Laboratory Outpatient and Professional Services $0 $0 X-ray and Diagnostic Imaging $0 $0 Prescription Drugs In Network Out of Network Generic Rx $20 Preferred Brand Rx $50 Non Preferred Brand Rx $70 Specialty Drugs 20% Deductibles and Cost Sharing In Network Out of Network Deductible (Individual) $1,500 $3,000 Deductible (Family) $4,500 $9,000 Coinsurance 20% 40% Out of Pocket Maximum (Individual) $3,500 $7,000 Out of Pocket Maximum (Family) $10,500 $21,000 Services In Network Out of Network Primary Care Visit $10 40% coinsurance Specialist Visit $60 40% coinsurance In Patient Hospital Services $200 20% Coinsurance Copay per Stay and 40% coinsuranceServices In Network Out of Network Emergency Room Services $400 Copay and 20% Coinsurance a 20% coinsurance after $400 copay/visit Mental / Behavioral Health $10 copay 40% coinsurance Imaging (CT/PET Scans, MRIs) 20% coinsurance 40% coinsurance Rehabilitative Speech Therapy 20% coinsurance 40% coinsurance Rehabilitative Occupational & Physical Therapy 20% coinsurance 40% coinsurance Preventative Care $0 40% coinsurance Laboratory Outpatient and Professional Services 20% coinsurance 40% coinsurance X-ray and Diagnostic Imaging 20% coinsurance 40% coinsurance Prescription Drugs In Network Out of Network Generic Rx No Charge Preferred Brand Rx $35 Non Preferred Brand Rx $75 Specialty Drugs $150