Read the insurance case provided and help me write a detailed explanation of recommendations for this client
THE FAMILY William and Lucy Hayes have come to you, a nancial planner, for help in developing a plan to accomplish their nancial goals. From your initial meeting, you have gathered the following information. William Hayes, age 37, is the owner and manager of a store that sells children's toys. He has Schedule C net income of $65,000. Lucy Hayes, age 37, is a paralegal with an income of $55,000. Their net worth is $300,000 consisting of $150,000 equity in their home and $150,000 of investments and cash and cash equivalents. William and Lucy have been married for 15 years. They plan to retire in 25 years. They have two children, Taylor and Cavan, and do not plan to have any more children. Taylor, age 15, attends the local public high school and is in the ninth grade. Cavan, age 11, is in the sixth grade at the local grammar school. FINANCIAL GOALS & CONCERNS Their primary goal, for this example, is to develop an appropriate risk management portfolio. Their other goals and concerns are as follows: 1. The Hayes' want to provide a standard of living post retirement of 80% of their preretirement earnings. They want to accumulate suicient assets to send their children to a state university. They want to minimize their current income tax liability. They want to expand the toy store. They want to be mortgage and debt free at retirement. They want to purchase an airplane upon retirement. 995*?!" EXTERNAL INFORMATION Bank Lending Rates 0 15year conforming annual rate mortgages are 5.0%. 0 30year conforming rate mortgages are 5.5%. 0 Any closing costs associated with mortgage renance are an additional 3% of the amount mortgaged and will be included in the mortgage or paid directly. INSURANCE INFORMATION Life Insurance Policy Through Face Amount Cash Value Annual Premium Beneciary Contingent Beneciary Settlement Options Type Lucy also has an accidental death and dismemberment policy through her employer. She is covered for $100,000 under this policy. She pays a premium of $68 per year for this coverage. Health Insurance All family members are covered by Lucy's employer under a group health plan with an annual per person deductible of $400. After the deductible is met, the plan pays 100% of the first $2,000 of covered hospital charges for each hospital stay and 80% thereafter. The policy features a $2,000 maximum annual out-of-pocket limit. The plan will then pay 100% of any other covered expenses. The family premium is $460 per month. $400 per individual deductible per year $1,000,000 lifetime benefit limit per person The Hayes' have dental insurance. The premium is $216 annually. Disability Insurance William has a personal disability policy with an own-occupation definition that provides a monthly benefit of $2,800 and has a 30-day elimination period. The policy was purchased from a local insurance company. This policy covers both accidents and sickness, is guaranteed renewable, and has a benefit period of five years. His annual premium is $608. Lucy has an own-occupation definition disability policy that provides an annual benefit of 65% of her gross pay and has a 90-day elimination period. The policy is provided through her employer. The policy covers both accidents and sickness and provides benefits until age 65. The annual premium is $460, and the employer and Lucy each pay half. 126 RISK MANAGEMENT MINI CASEHomeowners Insurance The Hayes' have a HO-3 policy (replacement value and open perils endorsement) with a $250 deductible, a dwelling value of $300,000, an 80% coinsurance requirement, and a current yearly premium of $2,400. There is a $100,000 liability coverage per occurrence. The home is worth $375,000 and the separate land value is $75,000 for a total value of $450,000. If they raise the deductible to $2,000 and increase coverage to $375,000 for the dwelling, they will save $675 per year. Automobile Insurance (Personal Auto Package - PAP) Type Liability Medical Payments Physical Damage, Own Car Uninsured Motorist Collision Deductible Comprehensive Deductible Premium (per year)
