1. Find two different company products for each recommended insurance and recommend one
based on your analysis (add a screen-print of each to appendices)...2 marks
2. Follow the risk planning process to support your recommendations...2 marks
3. Is there any information missing that would help you make a better recommendation?
Explain...1 mark

 

 

Client specific information

 

1. Franz Smith, a 44-year-old portrait painter who was born in Austria, earns $70,000 per year from his business, recently received a significant heart condition with high cholesterol.
2. Sophia Smith, a 45-year-old Canadian-born businesswoman who earns $150,000 a year from her small consulting firm. She prefers to see a small amount of volatility in her portfolio because she is generally conservative.
3. they reside in Toronto, Ontario, and possibly intend to relocate to Austria
4. Max, a 14-year-old, aspires to attend college to study architecture.

 

 

 

 

Determine the current situation's issues and opportunities

 

1. With an annual net worth of $1,123,310, the pair has a strong financial position, as shown by their statement of net worth and cash flow. demonstrating that their assets have grown more rapidly than their liabilities.
2. Sofia has $60,000 of unused room in her RRSP, thus the problem with their position is that she hasn't fully utilized her contribution.
3. Franz is dissatisfied with the results of his spouse's RRSP with Slowpoke Asset Management because he hasn't made any money from this investment.
4. Franz has a sizable coin collection worth about 40,000 dollars, which, if sold at the right price, may put him in a profitable position.
5. The couple has an outstanding mortgage of $200,000 with XYZ Bank that is fixed at a 6.75 percent interest rate. If they switch lenders, they might be able to achieve lower interest rates. It is imperative to investigate every option.

 

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What is a Risk Matrix?

 

The possibility that the risk event will occur and the possible impact that it will have on the business are two intersecting aspects that form the basis of the risk matrix.

In other words, a risk matrix is a tool that enables you to see the likelihood of danger vs its possible severity. The risk matrix severity or likelihood are other names for it.

Risks can be classified as high, low, or moderate depending on their likelihood and severity. Risks are divided into categories in the risk diagram based on their likelihood and effects on the severity of the harm, allowing for the early detection of worst-case scenarios.

 

 

The risk matrix for Franz & Sophia 

 

Severity

 

	Critical	Moderate	Marginal
Probable	Franz and Sophia have no emergency fund in case severe health issues arise for any of them.  Franz recently received a significant heart condition with high cholesterol	Due to the uncertainty of returns, Franz's risk of financial loss increases if he takes money out of his spousal RRSP and invests it in his stock brokerage account.	No insurance or insurance riders are considered in place for work-related accidents by Sophia & Franz.
Occasional	Risk of filing an insurance claim if Franz and Sophia switch mortgage lenders since the new lender might apply different standards to determine whether they qualify for a mortgage.	Chances of unforeseen costs occurring if Franz and Sophia don't make a will	Since the proceeds from the sale of shares in the software company Flying Pig are currently sitting in Franz's account, they may lose value over time.
Improbable	Franz runs the risk of not profiting from his coin collection if the market doesn't see a sudden increase in demand for those types of coins.	In the event that a member of the family becomes disabled, there is no insurance in place.	The possibility of not receiving retirement benefits if Franz and Sophia moved to Austria

Insurance needs:

After looking at the skill matrix for Franz and Sophia, I can suggest the following things:

1. As Franz was recently discovered with high cholesterol and heart conditions, he must need Critical insurance coverage. He has a permanent life insurance policy with Schmetterling life insurance company for $20,000 with a guaranteed insurability rider that allows him to purchase five times the face amount in additional insurance every five years. He should take advantage of it and add the critical insurance cover. Some insurance providers include a critical illness benefit with their plans, and policyholders can also add this benefit as an add-on to their coverage. Regardless of the overall costs spent during the actual medical treatment, the critical sickness cover gives an upfront lump payment amount. There are numerous insurers that offer critical illness riders for 10-15 conditions, but comprehensive policies from insurance companies may cover up to 38 critical illnesses, depending on the firm and the policyholder's needs.
2. Sophia has a T-100 life insurance policy that she bought from Longlife shortly after Max was born. She can add the children's insurance rider to it. The least expensive approach to get coverage for your child is typical term riders. Before the child turns 17 years old, the coverage can be added when the parent buys insurance. Depending on which comes first, this coverage is valid until the child reaches a specific age, typically 25 years, or until the parent turns 65 years old. Depending on the insurance provider, the coverage is typically offered in increments of $5,000 up to $25,000 or $30,000. All her children, including any that you may have in the future, may be covered by the same rider. The cost of the insurance is unrelated to how many kids are included in the policy. Between the ages of 21 and 25, a dependent child's term insurance rider may be changed to permanent insurance. Most policies will continue until these ages with the same convertibility possibilities even if the original policyholder passes away before the dependent kid achieves these milestones.
3. There is no disability insurance in place for any of the members of the family. Disability is one aspect that we can't ignore because a family's income can be totally or partially affected by it. Getting disability insurance can assist in replacing a portion of your income if you become handicapped as a result of an accident, a significant disease, or a mental health condition. f you are unable to work due to an injury or illness, it helps you make up for your lost income by providing you with a monthly benefit. Your specific payout will depend on the level of insurance you choose.

Moreover, there are valuable tax credits that can put money back in your pocket, if you look after an elderly or disabled family member: 

• the disability tax credit (DTC),
• the medical expense tax credit (METC),
• the home accessibility tax credit (HATC) and
• the Canada Caregiver Credit.

Answer rating: 100% (QA)

Heres a comprehensive analysis and recommendations for insurance based on the provided information 1 ... View the full answer