A 40-year-old financial planner, earning $180,000 annually, is considering critical illness insurance. He currently has sufficient emergency savings ($100,000). He estimates that if he were diagnosed with a critical illness, he would incur approximately $50,000 in immediate uncovered medical costs and would want to take 12 months off work for recovery, requiring replacement of 70% of his income. What critical illness coverage amount would be most appropriate?

Question: A 40-year-old financial planner, earning $180,000 annually, is considering critical illness insurance. He currently has sufficient emergency savings ($100,000). He estimates that if he were diagnosed with a critical illness, he would incur approximately $50,000 in immediate uncovered medical costs and would want to take 12 months off work for recovery, requiring replacement of 70% of his income. What critical illness coverage amount would be most appropriate?

Answer options:

• A. $126,000 ✅ B. $176,000
• C. $226,000
• D. $250,000

Correct answer: B. $176,000

Explanation: The appropriate critical illness coverage amount would be the sum of immediate uncovered medical costs and the income replacement needed. Income replacement for 12 months = 70% of $180,000 = $126,000. Adding the $50,000 in immediate costs, the total coverage needed is $126,000 + $50,000 = $176,000. Emergency savings are separate and generally not intended for long-term income replacement, making CI appropriate.