Planit:Detailed Life and Disability in One Policy Exercise

From Planipedia

Solve for the following problem:

Ming’s Term Insurance provides a benefit for $50,000 in the event of his death or disability. He pays $2,000 each year towards this mutually exclusive dual policy. The life coverage portion of the policy is designated to go to Elsie. The disability portion is only valid for three (3) years, and pays out 25% of the benefit in the first year, 25% in the second year, and the remaining 50% in the third year. It is not taxable and not indexed.

Elsie’s Whole Life Policy for a $70,000 benefit is to go to their older child. She pays $800 in premium every month, since this policy also provides separate disability coverage. It will pay out $20,000 immediately in the first year of Elsie’s complete disability, (not indexed). If the disability continues, it provides a $2,000 monthly benefit until her age 75 with a 31-day waiting period.

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