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Insurance Assignment ADMS 2541 W 2019
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. 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.
Required:
Question a) Estimate their requirement for additional life insurance using the income method and the expense 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.
Question b) Analyse 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.
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