Astrid and Angelo are 32 and 42 respectively. They had their first child together last year, baby Oliver, currently 11 months old. Astrid was on maternity leave for 10 months only and has recently returned to her work. Angelo has 2 other children with his ex-spouse, Cindy. He pays monthly support for the children and shares custody equally. As part of the divorce settlement Angelo is required to have life insurance in the amount of $500,000 with Cindy named as the beneficiary. The policy is a term 25 policy, which expires in 2043.

Angelos children are age 7 Murphy, and age 5 Reese. Their mother lives an hour away from Angelo and Astrid. She used to work full time as a store manager earning $72,000, gross. She has some benefits with her employer as well including 2x life insurance, EHC, and disability. Her children are named as beneficiaries on her insurance policy. She is currently on disability leave as a result of a workplace accident. As a result, she is receiving WSIB payments and CPP Disability income.

Angelos children love Oliver and cannot wait until he can start walking and talking so they can have a new partner in crime. After all, as the baby, he is the cute one for now and they can place all the blame on him so that no one gets in trouble! The kids are athletically inclined. Murphy plays tennis and Reese plays basketball. They are considered high-performance athletes for their age and have private coaches that cost $20,000 a year for each child. They hope Oliver will take up one of their sports, or both!

Angelo works as a salesperson for an HVAC company. He earns about $250,000 gross annually, which includes his bonus. His company also provides him with EHC and a defined contribution pension plan. He has private life insurance term 20, which expires in 12 years., Astrid is the beneficiary. He first purchased it when Murphy was going to be born. The face value is $150,000. His average tax rate is 34%.

Astrid finished law school top of her class and started up her own practice. She is still in the early stages of building the business since she just finished her maternity leave. Her specialty is real estate law. Her income has been roughly $65,000, gross. With the real estate market booming, she is expecting her income to increase significantly in the next year. She has no benefits as she is self-employed. Her average tax rate is 24%.

Astrid and Angelo live in a 4 bedroom, 5 bathroom house located in Forest Hill. The house is valued at $4.5 million. They have an outstanding mortgage of $2,150,000 on the house. They have mortgage insurance. The house has a small pool and hot tub. There is also a mini basketball court. They have comprehensive insurance coverage on the house with a deductible of $500.

Astrid drives a Porsche Panamera and Angelo drives a BMW M5. Astrid only drives to the grocery store and to take the kids places. Angelo drives to work every day and to client meetings. He also takes his car on the track. The cars are both less than 5 years old. They have comprehensive coverage on both cars with liability of $500,000 each and a deductible of $1,500.

Astrid inherited an apartment in Spain that is currently rented out. She plans to keep this forever as a memory of her childhood and late family member. Angelo bought a vacation property in South America recently so that the family can spend their winters there. He also thinks it is a good investment as it is located in a tourist spot where short term rental rates are quite high.

They have the following investment assets:

Non-registered Joint Account invested in various ETFs. The current value is $124,200.

They each have a TFSA account where the investments mirror each other. They are both invested in GICs and bonds. The value of the account is $42,000 for Astrid and $39,000 for Angelo.

Angelo has his defined contribution pension plan with his employer valued at $622,000. The funds are invested in Canadian mutual funds.

Astrid has an RRSP valued at $112,000 invested in international growth mutual funds.

Since Murphy and Reese have been such amazing big brothers Astrid and Angelo decided they will get the boys a puppy! The boys mother is not very pleased because she is allergic, but the puppy will stay with Astrid and Angelo.

Both Astrid and Angelo have been very fortunate to have a lot of help from their parents with Oliver and with their finances, which has enabled them to get so far with their financial assets. Their parents continue to help on occasion, but since Astrid and Angelo are financially stable, the grandparents now focus more on helping with the kids and household duties as much as they can. Their parents are in their early 70s but stay in pretty good shape.

Assumptions:

a) Use the average benefit amount for all CPP figures.

b) Assume retirement is age 65 for each individual working.

c) Astrid is not a legal guardian for Murphy and Reese. If Angelo passes away the kids will live with Cindy.

d) Assume CPP benefits will only be payable until age 18 for the children.

e) Use a real after-tax discount rate of 2% for your calculations.

f) Use the average tax rate to determine their after-tax incomes.

g) Round calculations to the nearest dollar. Round insurance needs recommended amount to the nearest hundred thousand round lot.

Question 1:

a) Calculate insurance needs for Angelo and Astrid using the income approach. You will need to find the CPP benefit amounts for the calculation. Use current figures, not the ones from the text. (30 marks)

b) What type of insurance coverage would you recommend for Angelo and for Astrid. Provide your rationale. No premium calculation or estimate is required, just an explanation. (10 marks)

Question 2:

Complete the risk assessment matrix presented below.

Identify 2 additional risks not included in the risk matrix below that the family faces and complete the risk assessment for the additional risks.

Risk	Assessment	Recommendation
Death of Astrid
Death of Angelo
Death of Cindy
Disability of Astrid
Disability of Angelo
Car Property - Angelo
Car Property - Astrid
Car Liability - Angelo
Car Liability - Astrid
House - Property
House - Liability
Foreign Property Astrid
Foreign Property Angelo