Reference no: EM133330242
Assignment:
You are a financial planning consultant with an Oklahoma Life, Accident, and Health Insurance license. A client has approached you for advice on an insurance program. The client's existing insurance program is provided following the instructions for the written report.
• Analyzes the client household's existing insurance and retirement program.
• Recommends changes that would remove unnecessary or inappropriate coverages and changes that would add to or provide a more complete insurance program for your client's household.
You may make additional assumptions beyond those already provided about your client to further fill in the details of your client's household situation. Provide any such assumptions or details at the beginning of your report, and build your client's program accordingly.
A complete insurance program includes an evaluation of all your client's insurance needs and the selection of coverages. A complete insurance program may include more than the coverages your client already has. Several other coverages studied this semester may also be important.
One of the issues required to be addressed is the appropriate amount of life insurance for your client's household. Additional assumptions about the household's financial goals may be necessary for this analysis. To determine the amount of life insurance that fits your client's needs, you must use the needs approach illustration on page 216 - 219 in the section on the Amount of Life Insurance to Own. Using any method other than the detailed needs approach, or allowing an insurance agent to do the calculations for you, will lead to a less than passing grade on the project. Your report must contain a description of your analysis of this issue.
The program you recommend for your client will be graded on the basis of how well it fits the needs of your client's household. Your report needs to provide substantive recommendations for changes in existing insurance coverages and insurance you advise your client to buy to cover gaps that exist now. Your report is expected to have business appropriate grammar, verbiage, and formatting.
Riley and Kelly Johnson are a married couple who live in Edmond, OK. Riley was 37 years old in July and works as a coach and high school teacher at a local school. Riley earned $59,000 before taxes in 2018. Kelly will be 36 years old in December and is a self-employed web designer and marketing consultant with an office at home. Kelly's income fluctuates each year but earnings before taxes in 2018 were $67,000, which was an average year. The Johnsons have two children; Parker is 12 and Quinn is 10.
The school district pays the premium for $60,000 in group term life insurance for Riley who has no other life insurance. Kelly has a $25,000 whole life insurance policy that was purchased at birth. Last year, the Johnsons bought $35,000 whole life insurance policies on each of the children. They plan to use these policies to also save for the children's college.
The Johnson's 3 bedroom, 2 bath, house has 1,800 square feet of living space with an attached garage. Their house in west Edmond was newly built when they bought it 8 years ago for $152,000. The balance on their 30-year mortgage is now $118,000 and they make a monthly payment of $1,341 to their escrow account for the mortgage, property taxes, and insurance. Monthly household expenses are on average about $450 for utilities, $600 for food, $120 for insurance, and $300 for entertainment. Riley and Kelly do not keep close track of most of their expenses, but believe their household expenses for other items such as clothing, personal care, child care, car maintenance and gas are about average.
Riley participates in a defined benefit retirement plan through the Oklahoma Teachers Retirement System and is eligible for full retirement benefits at age 58. Kelly does not have a formal retirement plan but does set aside about $250 per month in an index mutual fund. The mutual fund was worth $47,789 at the end of September. The Johnsons carry average balance of $900 per month on credit cards. They still owe $300 per month for student loans which will be paid in full in another 16 months. The Johnsons usually have about $2,000 in their checking account and maintain a savings account balance of $6,000 for emergencies.
They have an unendorsed HO-3 policy with Coverage A limits of $130,000. The Johnsons own a motorcycle that they sometimes ride around town on weekends. Riley inherited antique jewelry, valued at $6,000, from a grandmother. Kelly collects vintage graphic novels and has a collection valued at $9,000. The jewelry and the book collection are stored in the storm shelter accessed from the garage.
Riley's employer provides health insurance through a comprehensive major medical plan with a $1,200 deductible and an 80-20 cost sharing provision and a $5,000 out of pocket maximum. The plan is noncontributory so the employer pays the entire premium to cover Riley. Spouses and children can be added to the plan at the employee's option with the employee paying half of the premium (the employer pays the other half). All of the Johnsons are in good health and they thought their share ($360 per month) of the premiums was too expensive so they chose not to enroll Kelly,
Parker, and Quinn in Riley's health insurance plan. Instead, they bought an AFLAC cancer policy for $50 per month on Kelly and an accident-only health insurance policy for $45 per month on the children. Kelly's father died at age 46 of cancer.
The Johnsons own a 2017 Toyota Camry with 36,000 miles and a 2006 Ford Taurus with 128,000 miles. They pay $345 per month on a loan for the Camry that will be paid off in June of 2020. The Johnsons have an unendorsed Personal Automobile Policy with full coverage on both cars. The Part A: Liability Coverage limits are the Oklahoma minimums of $25,000/$50,000/$25,000. The same limits apply to Part C: Uninsured Motorists. Part B: Medical Payments limits are $5,000 per person. The policy has a $250 deductible for both Collision and Other-Than-Collision in Part D for both cars. There is a $50 per disablement towing and labor provision. Kelly and Riley both have clean driving records.