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.
Written Report Instructions
Your assignment is to prepare a written report of 1,600 – 2,000 word count for your client that:
• 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 in Chapter 11 on page 208 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 lower 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. Submit your report on your project through D2L Dropbox.
Kerry and Kendall Jefferson are a married couple who live in Edmond, OK. Kerry was 37 years old in July and works as a coach and high school teacher at a local school. Kerry earned $59,000 before taxes in 2017. Kendall will be 36 years old in October and is a self-employed web designer and marketing consultant with an office at home. Kendall’s income fluctuates each year but earnings before taxes in 2017 were $66,000 which was an average year. The Jeffersons have two children; Jamie is 10 and Jesse is 8.
The school district pays the premium for $50,000 in group term life insurance for Kerry who has no other life insurance. Kendall has a $30,000 whole life insurance policy that was purchased at birth. Last year, the Jeffersons 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 Jefferson’s 3 bedroom, 2 bath, house has 1,800 square feet of living space with an attached garage. The 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 $106,000 and they make a monthly payment of $1,311 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. Kerry and Kendall 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.
Kerry participates in a defined benefit retirement plan through the Oklahoma Teachers Retirement System and is eligible for full retirement benefits at age 58. Kendall 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 $37,789 at the end of September. The Jeffersons 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 Jefferson 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 Jeffersons own a motorcycle that they sometimes ride around town on weekends. Kerry inherited antique jewelry, valued at $6,000, from a grandmother. Kendall 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.
Kerry’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 Kerry. 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 Jeffersons are in good health and they thought their share ($360 per month) of the premiums was too expensive so they chose not to enroll
Kendall, Jamie, and Jesse in Kerry’s health insurance plan. Instead, they bought an AFLAC cancer policy for $50 per month on Kendall and an accident-only health insurance policy for $45 per month on the children. Kendall’s father died at age 46 of cancer.
The Jeffersons own a 2016 Toyota Camry with 36,000 miles and a 2007 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 2019. The Jeffersons have a Personal Automobile Policy with full coverage on both cars. The Part A limits are $25,000/$50,000/$25,000. The same limits apply to Part C. Part B 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. Kendall and Kerry both have clean driving records.