Sam and Susan Scully have come to financial planner Lissa Cardenas to ask about the adequacy of their life insurance coverage. They have two children ages 4 and 2. They are each 35 years old. Sam works full-time in a management position in a manufacturing company. He earns $95,000 p.a. and does not expect further promotions, but does expect his salary will keep pace with inflation. His take home pay is $70,000 after all deductions. The CPP deduction was $2,700 last year. He and the employer each contribute 6% of his salary to the pension plan. Susan spends much of her time as a homemaker, but she earns $15,000 p.a. in part-time jobs, which is also her take home pay. She expects she will continue to do that in the future. They plan to retire when Sam reaches age 65.
They would like to continue to support the children for the first few years after high school; they are saving a small amount every year in an RESP for them. The balance in the RESP is now $10,000. They live in Wawanesa, Manitoba. They also have $40,000 in TFSAs, $10,000 in bank accounts and $4,000 in an RRSP. Sam will get a reasonably good employer pension, but Susan will get only CPP when she retires. If Sam predeceases her, she would get a top-up of CPP that would take her to the maximum CPP. They own their own home in Wawanesa, Manitoba, with a mortgage of $200,000 and an estimated market value of $400,000. They pay off the credit cards completely every month and have no other debts. Their budget is balanced, but after paying normal living expenses, the mortgage and small contributions to the RESP and $5,000 to the TFSA, they will not have money for much else. They are in excellent health and do not smoke.
Susan gets no benefits from her work, other than the mandatory employer contributions to CPP. In addition to the pension plan, Sam has good extended health care insurance covering the whole family and life insurance on him worth two times his salary, from the employer. His employer has a long-term disability plan and Sam pays the premiums for a benefit of 65% of his salary if he is unable to perform his existing job. They would have to pay $10,000 p.a. to replace the employer benefits. Sam also has a whole life insurance policy with a face value of $100,000 and a cash surrender value of $6,000.
They own only one car because Sam doesnât need a car for his work. It is insured for $200,000 liability, collision, theft and accident, with a deductible of $100. The house is insured for $100,000. The insurance company estimates that the land is worth $80,000 of $400,000 market value. The deductible is $100.
Required:
a) Estimate their requirement for additional life insurance using the income method, the expense method, and the transition method. Recommend how much additional insurance they need and what kind they need. Use a discount rate of 3% and assume all the expenses and income are constant.
b) Analyze their other insurance needs, keeping in mind the basic risk management process. Recommend other additional insurance coverage they need or can reduce or cancel, and estimate how much they need.
Sample Solution
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Rosewood Hotels Marketing Plan The principle reason for the advertising plan is to build client maintenance and faithfulness and increment use between land. The quantity of private lodging occupants should increment from 5% a year ago to 10%. Advertising circumstance: Although the Rosewood brand is exhausting and not very notable, it isn’t clear what the best corporate brand technique is without losing the estimation of every autonomous brand lodging and without losing clients. For what reason is rosewood thinking about another brand system? What are the key issues that urged them to reexamine their image technique? Since individual brand procedures no longer compare to their objectives, Rosewood is thinking about another brand system. John Scott, Rosewood’s new president and CEO, is thinking about another methodology to advance organization development. The board feels that presently is the best an ideal opportunity to make Rosewood a corporate brand. Notable corporate brand names will urge lodging visitors to remain at other Rosewood inns. For more than 37 years, sumptuous convenience has added to the overall accomplishment of Rosewood Hotel and Resort. Business extension in China in 2014 shows that Rosewood has become a pioneer in lodging improvement, which is the way the organization will utilize its situating to turn into a worldwide deduction pioneer in the business. The sumptuous travel report of Resonance 2016 shows that the chance to learn exceptional encounters and new things is the two main thrust behind the present extravagance travel. Likewise, Rosewood’s “neighborhood venture” permits Rosewood clients to extend their connections. For Rosewood Hotels and Resorts this is a time of unimaginable development and extension, and Asia is one of our primary business sectors. Because of the extraordinary accomplishment of Rosewood Beijing which opened in October 2014, we are anticipating proceeding with business extension in this district by including 10 Asian land: Phnom Penh, Guangzhou, Three Sub, Bangkok, Phuket, Jakarta, Siem Reap, Clear Water Bay, Luang Prabang and Tanah Lot, Bali. Our visitors are adult worldwide voyagers, so we don’t spend significant time in serving American watchers or new Asian clients. Rather, we are concentrating on planning inns to suit the necessities of recognizing voyagers around the globe. Toward the finish of a month ago, the assortment of extravagance lavish lodging bunch Rosewood Hotels and Resorts was re-recorded. The new inn (Group 23) – Rosewood Luang Prabang – is a ultra-extravagance resort situated in the forested areas on a serene slope in the focal piece of Laos in Southeast Asia. The district’s exceptional history, tropical and tranquil offer innumerable social encounters anticipating disclosure. Rosewood Hotel not just unites new and alluring retreats (counting the idea of the gathering’s first tent manor – subtleties are booked later!), They likewise burrow a great deal of remarkable nearby encounters.>
