FIN 2063 – Group Case Assignment – Winter 2024 Term

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George Brown College Canada *

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2063

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Finance

Date

Apr 3, 2024

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docx

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6

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INSURANCE IN FINANCIAL PLANNING CRN-55686-202302 – Group Case Assignment – Part I Submitted by: Hriddhi Thakurathi - 101422658 Deep Prajapati - 101402374
1. Cover Letter to Clients: Hriddhi Thakurathi Financial Advisor Dunder Mifflin Insurance Solutions 777 Augusta Avenue Toronto,ON M5G 2K2 2024-03-20 Jack and Jill 123 Main Street Toronto,ON M1J 3O4 Dear Jack and Jill, Subject: Summary of Financial Planning Recommendations I am pleased to present a summary of our findings and recommendations based on our thorough review of your financial situation and objectives. Your key goals include securing the financial future for your children, Travis and Tracey, ensuring adequate retirement savings, optimizing your risk management strategies, and minimizing tax liabilities. Our major findings indicate that you have a comprehensive insurance coverage in place, your retirement planning is on track with Canada Pension Plan (CPP) and Old Age Security (OAS) benefits, and your estate planning is well-structured with mirror wills and Powers of Attorney. However, we have identified that you have limited focus on tax planning, which presents an opportunity for potential optimization. To address these findings, we recommend three urgent actions. First, we suggest reviewing your existing life insurance coverage to ensure its adequacy in meeting your family's needs. Second, we encourage you to consider tax planning strategies to optimize your savings. Finally, we advise evaluating your investment portfolios to ensure proper diversification. We look forward to discussing these recommendations in detail and assisting you in achieving your financial goals. Sincerely, Hriddhi Thakurathi Financial Advisor Dunder Mifflin Insurance Solutions thakurathihriddhi0707@gmail.com
2.Risk Management Process Outline: 1. Risk Identification Example: We will conduct a comprehensive review of your financial situation, family dynamics, and lifestyle to identify potential risks that could impact your financial security and well-being. This may include risks such as premature death, disability, property damage, liability exposures, and potential long- term care needs for your family members. 2. Risk Assessment Example: For each identified risk, we will analyze the potential impact on your financial goals and the likelihood of occurrence. This will allow us to prioritize the risks and focus our mitigation efforts on the most critical areas. For instance, we may assess the probability and potential consequences of Jack or Jill becoming disabled and unable to work, or the impact of a natural disaster damaging your home. 3. Risk Mitigation Strategies Example: Based on the risk assessment, we will recommend appropriate risk management strategies to protect you and your family. This may include implementing insurance coverage for life, disability, property, and liability risks to transfer potential losses. We will also explore strategies to reduce the likelihood or severity of certain risks, such as implementing home security measures or maintaining a healthy lifestyle. 4. Implementation and Monitoring Example: Once the risk management strategies are in place, we will work with you to ensure they are properly implemented and maintained. This may involve regularly reviewing your insurance policies, updating coverage as needed, and adjusting your investment portfolio to align with your evolving risk tolerance and financial goals. We will also monitor any changes in your personal or financial circumstances that may require modifications to your risk management plan. 5. Ongoing Review and Adjustment Example: As your life and financial situation evolve, we will periodically review your risk management strategies to ensure they continue to meet your needs. This may involve reassessing your risk profile, evaluating the effectiveness of your current risk management measures, and making any necessary adjustments to your insurance coverage, investment strategies, or other risk mitigation tactics. By following this comprehensive risk management process, we can help you and your family identify, assess, and effectively manage the various risks you may face, ensuring your financial security and peace of mind. Please let me know if you have any questions or require further clarification on any aspect of this risk management approach.
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3. Strategies for Managing Risk Earthquake Risk: Risk Management Strategy: Declining additional earthquake insurance. Rationale: The decision to decline additional earthquake insurance is based on a thorough assessment of the risk landscape in your area. By analyzing historical data, geological surveys, and expert opinions, we have determined that the probability of a significant earthquake occurring in your region is relatively low. As a result, relying on existing property insurance coverage, which may include some level of earthquake protection, is deemed sufficient to mitigate the potential financial impact of such an event. This strategy allows you to allocate resources effectively while maintaining a balanced approach to risk management. Car Wear and Tear Risk: Risk Management Strategy: Building a carport. Rationale: The decision to build a carport as a risk management strategy for mitigating car wear and tear is grounded in the understanding that exposure to elements can accelerate vehicle deterioration and reduce their lifespan and resale value. By constructing a carport, you create a protective shelter that shields your vehicles from harsh weather conditions such as sun exposure, rain, snow, and hail. This proactive measure not only minimizes wear and tear on your vehicles but also enhances their longevity, performance, and overall value. Investing in a carport demonstrates a commitment to preserving your assets and ensuring their optimal condition, ultimately leading to cost savings in maintenance and potential resale value. By implementing these tailored risk management strategies for addressing the Earthquake Risk and Car Wear and Tear Risk, you are taking proactive steps to protect your assets, minimize potential losses, and enhance the resilience of your overall financial plan. Should you require further guidance or wish to explore additional risk management strategies for other areas of concern, please do not hesitate to reach out for personalized assistance.
4. Risk of Premature Death Capital Needs Analysis (CNA): Calculations: The Total Capital Needed is calculated by summing Final Expenses, Debt Repayment, Emergency Fund, Education Fund, and Income Replacement. This comprehensive analysis provides a clear picture of the financial requirements in the event of premature death. Assess Adequacy of Existing Life Insurance Coverage: By comparing the results of the CNA with your current life insurance coverage, we can determine if your existing policy adequately meets your family's financial needs in case of premature death. Recommendations may include increasing coverage to align with CNA requirements and evaluating the need for additional term or permanent life insurance based on long-term financial goals. Other Issues Identified: Potential gaps in education funding for Travis and care costs for Tracey highlight the importance of addressing specific financial needs to secure their future well-being. Factors for Cancelling UL Policy: Considerations such as impact on long-term financial goals, estate planning objectives, and alternative investment opportunities should be evaluated before deciding to cancel a Universal Life policy. Tax Implications: Understanding the tax implications related to different types of life insurance policies is crucial. Tax treatment varies based on factors such as policy type, death benefits received, cash value growth, dividends, and group life insurance premiums. Limitations of Universal Life Insurance: Universal Life Insurance may not be suitable for everyone due to its complexity, cost structure, potential investment risks, and flexibility constraints. It is essential to assess whether this type of policy aligns with your specific financial objectives and risk tolerance. Drawbacks of Creditor Life Insurance: Creditor Life Insurance may offer limited coverage and lack flexibility in terms of beneficiaries or coverage amounts. Exploring alternative life insurance options that provide more comprehensive protection may be beneficial. Life Insurance for Lauren: Lauren's eligibility for life insurance or other coverage types depends on her health status and financial needs. A thorough assessment can help determine the most suitable insurance solution tailored to her circumstances. By addressing these considerations and recommendations related to the Risk of Premature Death, you can enhance your overall risk management strategy and ensure that your family's financial security is well-
protected. If you require further details or have specific questions regarding these recommendations or strategies, please feel free to reach out for personalized assistance.
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