Madam Tan is a 72-year-old widow who has recently been diagnosed with Alzheimer's disease. She has limited financial assets of her own and has been living with her daughter Stephanie for two years.
Her only income is RM850 a month in Social Security survivor's benefits. Stephanie wants to make sure her mother will be taken care of if Stephanie should die.
Stephanie, 40, is single and earns RM55,000 a year as a human resources manager for a small manufacturing firm. She owns a condo with a current market value of RM100,000 and has a RM70,000 mortgage. Other debts include a RM5,000 auto loan and RM500 in various credit card balances. Her Investment Mutual Fund has a current balance of RM24,500, and she keeps RM7,500 in a money market account for emergencies.
After talking with her mother's doctor, Stephanie believes that her mother will be able to continue living independently for another two to three years. She estimates that her mother would need about RM2,000 a month to cover her living expenses and medical costs during this time.
After that, Stephanie's mother will probably need nursing home care. Stephanie calls several local nursing homes and finds that it will cost about RM5,000 a month when her mother enters a nursing home. Her mother's doctor says it is difficult to estimate her mother's life expectancy but indicates that with proper care some Alzheimer's patients can live 10 or more years after diagnosis.
Stephanie also estimates that her personal final funeral expenses would be around RM5,000, and she'd like to provide a RM25,000 contingency fund that would be used to pay a trusted friend to supervise her mother's care if Stephanie were no longer alive.
Use Life Insurance Needs Analysis Worksheet to calculate Stephanie's total life insurance requirements and recommend the type of policy that she should buy.