The needs analysis has two variables. That is, expenses incurred at death and expenses to sustain the household. This could be split up into the following divisions.
- Clean up fund.
- Family sustenance fund
- Fund for surviving spouse.
- Emergency expenses fund and
- Retirement fund for spouse (Investment Dictionary, 2009).
The first thing would be clean up fund, which is a necessity in the case of Tom and Sue. This could be around $10,000 say. Continued income, at the rate of $67,800 per year is needed. The income for surviving spouse can be met with on long-term basis as Tom is still working and young enough. The final fund, The Retirement fund may also be met with on a long-term basis, with small savings. What remain are the Emergency fund and the matter of $67,800 (75% of 84,000 and 4800 child care) dollars per year.
Here we should know that it is wise to overestimate a little, according with the practice of Tom and Sue (Investment Dictionary, 2009). Emergency funds are usually to a tune of 3 to 6 months expense (i.e., around $31,500) of the household. That is, when we add $10,000, $67,800 and $31,500 and reduces the income of $56,400. Calculating we get an insurance gap of around $52,900 plus the premiums needed for surviving spouse and his sustenance (Build Yourself An Emergency Fund. 2009).
If we round off the gap at $50,000, First it would be better that the Wrights should consult an analyst and conduct a thorough analysis. Then if the gap cannot be bridged, Consult an insurance agent and buy more policy. They could also buy the gap cover policies offered by many companies (life insurance protection gap.2009).
Bob Brown can rest assured that the auto insurance payments would clearly cover for him as well as his passenger. It provides reasonable and necessary medical treatment for him and his passenger Ruth, regardless of who was at fault. The treatment coverage offers expenses for surgery, ambulance, physicians, hospital and even funeral expenses (not necessary in this case.). This part comes under the medical payments or med-pay (Roedar, 2007).
The collision damages to the vehicle are also well covered by the insurance. This coverage pays for the damages to Bob’s car. He should file a claim against the car that rammed into his car. It would cover for the repair of his car and even replace the car if it is necessary. Here the Actual Cash value of the car is taken, along with the depreciation to the car with age use and, wear and tear. This part comes under collision coverage section. As for the car moving in front of his car, he must overcome the legal presumption of his responsibility in hitting the car. For any liability proved against him he could use the Liability claim which would cover any property damage, bodily injury or even death, disease, or even loss of health. It even covers emergency first aids, bail bonds and even legal defense costs (Question, 2009).
Since the car behind Bob’s car slammed on to him the insurance company of the car is liable to pay for the damages of that car. Since there is no legal liability Bob’s insurance company is not liable for the damages.
The bodily injury and property damages are paid out on a per occurrence basis. This means that every accident drains your prescribed limit. This means that if you stick to the state prescribed limits of bodily injury and property damages you may run out on your prescribed limits and may have pay out from your own pocket (Question, 2009).
References:
Build Yourself An Emergency Fund. (2009). Web.
Investment Dictionary: Needs Approach. (2009). Web.
Question. (2009). Web.
Roedar, T. (2007). Types of Auto Insurance Coverage. Web.
What are the steps to closing a life insurance protection gap?. (2009). Web.