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Activity 1: Life Insurance for the Young Married Jeff and Ann are both 28 years old

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Activity 1: Life Insurance for the Young Married Jeff and Ann are both 28 years old. They have been married for three years, and they have a son who is almost two. They expect their second child in a few months. Jeff is a teller in a local bank. He has just received a $60-a-week raise. His income is $960 a week, which, after taxes, leaves him with $3,200 a month. His company provides $50,000 of life insurance, a medical/hospital/surgical plan, and a major medical plan. All of these group plans protect him as long as he stays with the bank. When Jeff received his raise, he decided that part of it should be used to add to his family’s protection. Jeff and Ann talked to their insurance agent, who reviewed the insurance Jeff obtained through his job. Under Social Security, they also had some basic protection against the loss of Jeff’s income if he became totally disabled or if he died before the children were 18. But most of this protection was only basic, a kind of floor for Jeff and Ann to build on. For example, monthly Social Security payments to Ann would be approximately $1,550 if Jeff died leaving two children under age 18. Yet the family’s total expenses would soon be higher after the birth of the second baby. Although the family’s expenses would be lowered if Jeff died, they would be at least $500 a month more than Social Security would provide.

Questions 1. What type of policy would you suggest for Jeff and Ann? Why?

2. In your opinion do Jeff and Ann need additional insurance? Why or why not?

Activity 2: An Argument About the Value of Insurance
You have been talking to some friends about insurance. One young married couple in the group
believes that insurance is really a waste of money in most cases. They argue, “The odds of most
bad events occurring are so low that you need not worry.” Furthermore, they say, “Buying insurance
is like pouring money down a hole; you rarely have anything to show for it in the end.” Based on
what you have learned from this chapter, how might you argue against this couple’s point of view?