Case Study Facts
Bill and Kathy Collins are a professional couple: both are aged 32. Bill is employed at a small family run business as a mechanic, while Kathy is self-employed as an architect. Both are social drinkers, and Bill is a regular cigarette smoker. Both infrequently smoke legal cannabis. Bill’s group benefits through his employer include the following:• $100,000 life insurance• $50,000 spousal life insurance coverage• $500/ week short term disability plan that covers him for six months• Up to $1000 dental and $1000 eyecare annually, with no deductibles or limitations Kathy has no coverage of her own since she has had little time to think about possible insurance coverages. Instead, they have worked to buy a home, pay down the mortgage and invest in RRSPs and TFSAs. Why might they want insurance?They own a home worth approximately $800,000, and their diligent prepayments have helped to reduce the mortgage to a very manageable $350,000. The mortgage was renewed last month at 3.5% with a 25-year amortization and monthly payments. Their RRSPs total just under$250,000 and they have $87,000 in their TFSAs. Assuming no return on both investment accounts. Their joint bank balance is a reserve fund with a normal balance of about $5,000. Last year Bill earned gross income of $107,500 and Kathy’s gross income was $143,000. She incurred$23,000 in expenses, $4,000 of which more closely related to lifestyle choices than business expenses. They have a line of credit with a current balance of $20,000: it was used to landscape and update their backyard during the pandemic. Generally, they use their credit card to cover monthly living expenses, paying off the total balance as it comes due. The average monthly bill is $3,500.Bill’s family history includes some heart disease later in life- Bill ascribes that to diet, and for that reason has adopted a low carb/ keto diet plan. Kathy’s mother has diabetes and high blood pressure, and her grandfather developed Alzheimer’s late in life. Recreationally, Bill loves to ride his motorcycle and they both enjoy scuba diving. They are thinking that they are now relatively settled, and it’s time to begin a family. They are thinking about their life insurance needs
Your Task
You are a financial advisor and Bill and Kathy Collins have come to your office looking for your guidance on their on disability and life insurance needs.
• Prepare a proposal as to why they might need insurance, and specifically what types of insurance and at what amounts.
• Be sure to show why your recommendation makes most financial sense.
• Consider the following in your proposal:
• Income replacement Disability coverage Education and mortgage needs Whole life, universal life, term coverage or a blend?
• Government plans and benefits
• Existing coverages Any other concerns you believe relevant.
• Amount of Coverage You need to present a reasonable, intelligent recommendation to them.
• Ensure that you reflect appropriate financial calculations and considerations.
