Tim Brown is a consulting engineer who has recently started his own practice and earns $80,000. His wife, Jenny, works part-time as a teacher and earns $15,000. Tim is aged 39 and Jenny is 37. They have four children: Mary, aged 4, Peter, aged 6, Julie, aged 8, and Percy, aged 10. Tim and Jenny wish that all their children should receive university education. To provide for this, they estimate that $200,000 should be set aside. The children would be dependent until they turn 25.

The familys basic living expenses are $3,000 per month. In addition, for each family member (including parents), this will increase by $1,000 per person. They own their home, which has a current market value of $500,000, and have a mortgage of $150,000. Credit cards, personal loans and other outstanding debts amount to $20,000. Tim has a 2018 model car, which is leased and has a $30,000 outstanding on it at present. Jenny has a 2011 model Van so that she can transport the children to school and other facilities. Her Van is valued at $10,000 and is fully paid for. Final expenses including funeral, legal and medical are expected to amount to $15,000. Additionally, they believe they need emergency funds of $20,000.

Tim has an accumulated superannuation fund, which has a balance of $250,000. Jenny also has a personal superannuation account, which will provide her with sufficient funding once she can access it at age 65. Tim currently has a life insurance policy for a lump sum of $200,000 with Jenny named as the beneficiary. Jenny does not have any life insurance cover. Assume Tims life expectancy is 82 and Jennys is 86.

Required: a) How much is the appropriate amount of life insurance cover required to provide for the familys future needs in the event of Tims death? (13 marks) b) If investment rate is 3%, how much is the amount of life insurance cover required using multiple approach in the event of Tims death? (4 marks) c) The use of the multiple approach for calculating a lump sum benefit to be taken out pursuant to a life insurance policy has been strongly criticised as being too simplistic in nature. Outline the basis for such criticism. (3 marks) d) As a financial advisor, you find Tim and Jenny reluctant to purchase additional life insurance policy. Briefly discuss with them the importance of adequate life insurance in a financial plan. (3 marks)