Planit:Detailed Life and Disability in One Policy Exercise Answer Key

From Planipedia

Question One:

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.

Answer:

To be able to enter detailed insurance information, first click Policies in the upper right corner.

To add Ming’s term life and disability coverage:

1. Click Policy in the right hand corner
2. Enter a Description for Ming’s dual insurance.
3. Set the Account Type and Regulatory Type to Insurance Policy
4. Ensure that the Ownership is set to 100% for Ming An.
5. Here you can enter the Payment Mode as Annual, and the Payment Amount is $2000
6. Click Save
7. Ming’s Dual Policy should now appear on the summary screen. Click Coverage beside it to add value to the policy.
8. Enter a new Description and set the Type to Term Life.
9. The Insured is Ming An, and the Death Benefit is $50,000.
10. After setting Elsie as the Beneficiary in the drop-down menu, click Save

You can also add the disability portion to the same policy. Click Coverage beside it to add value to the policy.

1. Enter a new Description and set the Type to Disability (Personal).
2. The Insured is Ming An, and the Lump Sum Benefits are $50,000 as was previously revealed.
3. For the 1st Year enter 25%.
4. The 2nd Year was 25% also.
5. The 3rd Year pays out the remaining 50%.
6. On the left, set the Coverage Period (Years) to three, since this is how long the policy is valid.
7. Uncheck the Taxable Benefits checkbox, since they are not taxable when paid.
8. The Index Rate is already correct at the default of 0%.
9. Click Save

To add Elsie’s permanent insurance:

1. Click Policy again in the right hand corner
2. Enter a Description for Elsie’s permanent insurance.
3. Set the Account Type and Regulatory Type to Insurance Policy
4. Ensure that the Ownership is set to 100% for Elsie Lee.
5. Here you can enter the Payment Mode of Monthly, and the Payment Amount of $800.00
6. Click Save
7. Elsie’s Permanent Policy should now appear on the summary screen. Click Coverage beside it to add value to the policy.
8. Enter a new Description and set the Type to Whole Life.
9. The Insured is Elsie, and the Death Benefit is $70,000.
10. After setting Other as the Beneficiary in the drop-down menu, new fields will appear for Name and Relationship. Enter an appropriate name and set the Relationship to Child.
11. Click Save

Note: Enter any name. This component of the data entry is not vital to the exercise. You can add the disability coverage for Elsie to the same policy, so click Coverage beside Elsie’s permanent policy to add value.

1. Enter a new Description and set the Type to Disability (Personal).
2. The Insured is Elsie, and the Monthly Benefit is $2,000 as previously discussed.
3. The Waiting Period (Days) is 31.
4. Set the or Until Age field to 75, since this is when the coverage expires.
5. In addition to the monthly benefit, enter the Lump Sum Benefits of $20,000.
6. Set the 1st Year to 100% since this amount will pay out all at one.
7. Uncheck the Taxable Benefits checkbox, since they are not taxable when paid.
8. The Index Rate should be set to 0.0%.
9. Click Save