Written and Verbal Presentation of Risk Management and Insurance Plan

Part A

Prepare and submit a written risk management and insurance plan for Maya and Amir Hope (case study begins on Page 2), a couple who have been referred to you by a current client. Your report should include:

A title page

Appropriate disclaimers

A letter of engagement

A Summary of the clients' goals, needs and your recommendations

Personal information for the clients and the assumptions used in the plan

A section on Financial Management, including a current net worth statement and a cash flow statement based on the projected cash flow of the clients (including the cash flow related to achieving their goals and needs)

A section on Risk Management, including:

oA summary of the client's current situation

oA needs analysis in the event that either of the clients dies prematurely or becomes disabled

oA discussion of the options, including the advantages and disadvantages or benefits and risks, that may improve the clients' current situation and help them meet their risk management and insurance goals and needs

oRecommended actions supported by analysis

800 words

Maya and Amir Hope Case Study

A New Baby as the Catalyst for Reviewing Risk Management Plans and Insurance

Maya and Amir Hope, a married couple, were referred to you by one of your current clients. Their friend suggested that with the birth of their baby, Sonya, earlier this year, they should consider reviewing their risk management plans in the event that anything negative should befall their family.

Personal Information

After graduating from university, Maya (born January 30, 1985) and Amir (born February 22, 1985) met one another while they were both attending teacher's college. They married four years ago and Sonya was born 11 months ago (November 1, 2016).

Employment Information

Both Maya and Amir are high-school teachers. Maya teaches English, French and Spanish. Amir teaches history and math. Maya and Amir each earn $60,000 per year (after-tax).

Retirement Planning

The couple would like to retire at age 60 with an annual income of $100,000 after-tax (in today's dollars). They both have excellent defined benefit pension plans through their school board. The expected income from their employment and government pension plans is expected to meet the majority of their retirement needs. You have determined that they will need to fund $10,000 of the $100,000 (in today's dollars) annual income that they will need to meet their retirement goals. The couple has no RRSP contribution room available given their pension adjustments. Neither has ever contributed to a Tax-Free Savings Account (TFSA).

Education Planning

Maya and Amir would also like to ensure that Sonya has the opportunity to attend post- secondary education in 17 years. The current cost of a four-year post-secondary education is currently $15,000 and inflation for education is expected to be 5%. They have not established a savings plan for this goal yet.

Risk Management and Insurance Planning

The couple have stated that they want to ensure that they can maintain their lifestyle and fund their goals, particularly Sonya's education, in the event of either of their deaths.

Maya and Amir both have group life insurance through their employer, amounting to two times their respective gross salaries of $90,000 each. They also have disability insurance. Their short- term disability is funded by the school board and provides 100% of their salary for three months using an own occupation definition of disability. Their long-term disability coverage pays 70% of their net pay for the remaining period up to two years using an own occupation definition of disability, followed by an any occupation definition for any period until their retirement that they remain on long-term disability. The couple also have health and dental benefits that covers them and Sonya for all of their health and dental needs.

Financial Details

The family live in a house worth $500,000. They have a mortgage balance of $365,000 at an interest rate of 4% with monthly payments of $2,000. Their property taxes are $4,800 per year.

Maya and Amir both have student loans at an interest rate of 5%. Maya's current outstanding balance is $20,000, while Amir's is $30,000. They each pay $500 per month towards the debts and look forward to them being paid off. They also have a car loan with $14,000 remaining on it.

The couple tries to maintain $5,000 in their chequing account each month after all of the bills have been paid. They have $10,000 in a joint savings account that they maintain for emergency purposes. They contribute $250 per month to the account to help build up their emergency reserves. They also have accumulated $30,000 in a savings account which they will be using next month to purchase a second car. The current vehicle that they use to drive to work together is worth $15,000.

Maya and Amir's largest expense after their mortgage and property tax payments is Sonya's expected $1,200 day care costs that will start later this month when Maya returns to work. The couple also has monthly expenses of $100 for home insurance, $300 for car insurance, $400 for a car loan, $300 for operating expenses related to their cars, $100 for heat, $100 for hydro,

$100 for water, $200 for telephone, internet and cable, $400 for food, $100 for clothing, $400 for vacations and $300 for entertainment. The couple also provide $1,000 per month to Amir's mother who has had tough times making ends meet since her husband died.

Risk Profile

Both Amir and Maya agree that they are comfortable with taking on risk to grow their money for their retirement and Sonya's education. Based on your discussion with them, they are comfortable investing in 30% Canadian equities, 30% U.S. equities, 30% international equities and 10% fixed income. They believe they can invest for an annual fee of 1%.

Health

Amir and Maya are both healthy. Neither of them smoke. They do enjoy a glass of wine with dinner twice a week, usually on the weekends. Prior to being off on maternity leave, Maya frequented the gym three times per week. She hasn't been as committed during her time away from work, but is planning to re-commit herself once she returns to work since they gym is on the way to school. Although he knows he should exercise more, Amir engages in physical activity once a week when playing volleyball in a local sports league.

Amir's father passed away three years ago from a heart attack when he was in his early sixties. Maya's mother, age 58, is currently undergoing chemotherapy for breast cancer.