- Keely Powertrain currently pays 85% of the cost of a single contract and 65% of the cost of a family contract. According
to this formula, how much would the employees’ monthly costs be for these plans? - The company is considering changing its formula for how much it will pay toward health insurance. If company switches
to a formula where it will pay the full cost of either plan for single coverage and it will contribute the full cost of a
single contract plus half the difference between single and family for family coverage, how much would the employees’
monthly costs be with this new formula? - Suppose that the company decides that it will contribute the full single or family cost of the lower cost plan toward either
of the two plans. What would the employee’s monthly costs be then? - Keely Powertrain’s management is very concerned about managing its health care benefi t costs, and would like to
strongly encourage its employees to select the lower cost point-of-service plan. Which of the employee cost formulas
proposed in Exercises 26 to 28 would be the best choice if management wants to do this?
F. Additional Exercises- Suppose that Pedro’s income puts him $1,850 over the cutoff for the 25% federal income tax bracket. The next lower
bracket is 15%. He lives in Washington, which has no state income tax. He anticipates paying $2,500 for child care next
year. How much would he save by using a fl exible spending account for these expenses? - Some health insurance companies will offer their insurance to an employer group only if the employer contributes at
least half of the cost of the insurance. Why do you suppose this is? - Some health insurance companies will not offer a low copayment plan to an employer if the employer also offers a less-
expensive, higher copayment plan. Why do you suppose this is?
13.3 Life Insurance 549Copyright © 2008, The McGraw-Hill Companies, Inc.
13.3 Life Insurance
Your own death is not a pleasant subject to think about, nor is the death of your loved
ones. But that doesn’t change the unavoidable fact that we will all, sooner or later, die. The
purpose of life insurance is to provide financial protection to the people who financially
depend on you when you pass away.
A life insurance policy is a contract between a policyholder (also called a policy owner)
and an insurer in which the insurer agrees to pay a set amount of money, called the death
benefit, to a specified person or group of people, called the beneficiaries, on the death of
a certain individual, called the insured. The insured and policyholder are often the same
person, but they don’t have to be; a woman might own an insurance policy on her husband
(or vice versa), for example.
The purpose of life insurance is to protect the survivors from the financial conse-
quences of the insured’s death. The size of policy needed therefore depends on what