Read the following text regarding your new clients, Mikhail and Molly, and, using the
Insureright.ca Disability Calculator
when necessary, answer the questions that follow. If you use the calculator, you should cut and paste the image of the portion of the calculator that supports your answer. Your case study should be submitted in typed format. No handwritten responses!
Mikhail and Molly Monahan are both 35 years old. Mike, as his friends call him, earns $42,000 annually as a self-employed mechanic. He runs a garage with a partner and three employees. For her part, Molly works as a bookkeeper for a small accounting firm where she earns $36,000 per year. Molly has disability insurance coverage equal to 2/3 of her salary through her employer’s group insurance plan. Mikhail has an individual disability insurance plan in the amount of $1,500/month which he purchased from you a few years ago. The plan includes a future purchase option. He has since married Molly and they now have a young child, so he would like you to review his disability insurance needs to make sure they have enough coverage. He and Molly have started saving for retirement and would like to continue to do so, even in the event that either becomes disabled.
They have provided a breakdown of their monthly expenses for you to analyze. They share expenses equally, with the exception of Molly’s personal loan, for which she is solely responsible, and the car lease and expenses. Mikhail is solely responsible for these.
Groceries: $600
Mortgage payment: $1,000
Property taxes:$300
Utilities:$200
Cell phones:$150
Internet:$100
Car lease:$300
Gas & maintenance:$150
Home insurance:$150
Molly’s loan:$100
Child care:$500
Clothing:$200
Gifts:$100
Entertainment:$200
Savings contributions:$500
Total Expenses:$4,550
They anticipate they would be in a 30% tax bracket when disabled.
QUESTIONS
What is the
total after-tax income the family can count on if Mikhail
becomes disabled? (2 points)
What is the additional disability insurance coverage required? (2 Points)