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Disability Income Insurance Needs Assessment For Juan And Isabel Espinoza

Analyze disability insurance needs with this assignment solution.

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Disability Income Insurance Needs Assessment for Juan and Isabel Espinoza9.2 Juan and Isabel Get a Handle on Their Disability Income NeedsJuan Espinoza and his wife, Isabel, have been married for 2 years and have a 1-year-old son. They live inChicago, where Juan works for Mechanical Solutions Company. He earns $3,200 per month, of which hetakes home $2,300. As an employee of Mechanical Solutions, he and his family are entitled to receive thebenefits provided by the company’s group health insurance policy. In addition to major medical coverage,the policy provides a monthly disability income benefit amounting to 20% of the employee’s averagemonthly take-home pay for the most recent 12 months prior to incurring the disability. (Note:Juan’s averagemonthly take-home pay for the most recent year is equal to his current monthly take-home pay.) Incase of complete disability, Juan would also be eligible for Social Security payments of $700 per month.Isabel is also employed. She earns $700 per month after taxes by working part-time at a nearbygrocery store. The store gives her no benefits other than Social Security. Should Juan become disabled,Isabel would continue to work at her part-time job. If she became disabled, Social Securitywould provide monthly income of $300. Juan and Isabel spend 90% of their combined take-home payto meet their bills and provide for a variety of necessary items. They use the remaining 10% to fulfilltheir entertainment and savings goals.Critical Thinking Questions1. How much, if any, additional disability income insurance does Juan require to ensure adequateprotection against his becoming completely disabled? Use Worksheet 9.2 to assess his needs.Answer:To assess Juan’s disability income needs, let's break itdown step by step using the information provided.Juan’s Current Disability Income:•Juan’s take-home pay:$2,300 per month•Company disability income benefit: 20% of his average monthly take-home pay.So, the company would pay:•20% of $2,300 = $460per month•Social Security: $700 per month (in case of complete disability).Total Disability Income from all sources:•Company benefit:$460per month•Social Security:$700per monthThis gives a total disability income of:•$460 + $700 = $1,160per month.Juan’s Income Needs:Juan and Isabel spend 90% of their combined take-home pay on necessities, which is:•Juan’s take-home pay: $2,300•Isabel’s take-home pay: $700•Total combined take-home pay =$2,300 + $700 = $3,000•90% of $3,000 = $2,700(monthly expenses).Disability Income Gap:When Juan becomes disabled, his total disability income from all sources is$1,160, but he needs$2,700per month to cover hisexpenses. So, the gap is:•$2,700-$1,160 = $1,540per month.Conclusion:Juan needs$1,540per month in additional disability income insurance to cover his expenses and maintain his lifestyle in theevent of a complete disability.This can be achieved by either purchasing additional disability income insurance or exploring other options for increasing thetotal disability benefits.2. Does Isabel need any disability income coverage? Explain.Answer:To determine if Isabel needs any disability income coverage, let's first examine her current situation and the incomeshewould have if she became disabled.Isabel’s Current Situation:•Isabel earns$700 per monthafter taxes.

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