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

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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 proper... ty assets.  Identify and be familiar with the most basic estate planning documents Max and Sarah Smith are a married couple. They are both 30 years old and they have a 3-year-old girl. Max is a loan officer and earns $55,000 a year. Sarah works as a retail store manager and earns $50,000 a year. Max's life expectancy is 80 years and Sarah's is 82. They plan on retiring when they are 65. There are three health insurance policies that they could choose from (see attached). Health Insurance: Help Max and Sarah 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 $2,500 per year and which plan to use if they estimate their medical costs closer to $25,000 per year. Help the Smiths 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 (~$2,500/year) High Medial Expenses (~$25,000/year) Estimated Medical Cost: FirstCare Bronze FirstCare Gold Blue Choice Gold FirstCare Bronze FirstCare Gold Blue Choice Gold Out of Pocket Expenses: $2,500 $500 $2,500 $12,700 $5,000 $5,400 Annual Premium: $2,519.64 $3,255.12 $4,004.28 $2,519.64 $3,255.12 $4,004.28 Total Cost: $5,019.64 $3,7255.12 $6,504.28 $15,219.64 $8,255.12 $9,404.28 Which plan should they choose? And Why? The Smith family should purchase the FirstCare Gold Health Insurance Plan. Reasoning behind this choice include overall lower total cost based on their estimations of $2,500 and $25,000 in medical expenses. With a young family raising a child, doctor visit will be regular, and this plan protects them in the event of serious illness. W.............................................continued [Show More]

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