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Case study

1.    Working in groups of 5 analyze the case below and address the listed questions in a written recommendations report and presentation.  (Please note: Individual submissions will not be marked.)  For your convenience, group discussion boards and lockers can be created on FOL so that you can communicate and share information outside of class.

2.    Your analysis of this case should be typewritten and professional in appearance. Your goal is to take the client through the necessary steps in order to have them consider purchasing and implementing your plan.

3.    Use the Needs Analysis format as discussed in class and referenced in text.

4.    Your report and presentation should be written/presented to your prospective clients in a clear and concise manner. You must use appropriate terminology for your client. Make sure you address your analysis to your clients, NOT to your professor.  The clients should be able to understand what your exact recommendations are for amounts and types of insurance, and how their needs lead logically to this recommendation.

5.    Spelling, grammar and appearance are important. Up to 10% will be deducted for work that contains errors, or is not clear, logical, and easy to understand.

6.    Manage the length of your written report so that a client will want to read it (Maximum 6 pages of text and 6 pages of appendices).  Your in-class presentation will be a maximum of 10 minutes.

7.    Each team member is required to submit a team member evaluation form.  At the discretion of the professor, individual marks may be adjusted.

8.    See FOL for grading rubrics.

The Case: Walter and Jessica

Personal Information
Walter and Jessicaare 34 years old and 33 years old respectively.  They met at Fanshawe College in 1999 and married in 2005.  Walter and Jessica have 2 boys: Wes (age 5) and Warren (age 3).  They happily live in London, Ontario.


After attending Fanshawe College, Walter began working in the snack food industry.  Since 2011, he has held increasingly senior positions with Old Dutch Foods Inc. and is now currently employed as Wholesale Distribution Sales Manager, earning $82,500 per year.  The snack food industry is somewhat volatile due to changing consumer tastes but he expects his salary to keep pace with inflation. Walter would like to retire by age 60, assuming he can afford to do so.

Jessica graduated from Fanshawe College with a Diploma in Business-Marketing and has held numerous positions in the industry.  At present, Jessica works part-time (20 hours per week) for Good Life Fitness as a Marketing Officer, earning $25,000 per year.  Jessica hopes to secure full-time employment next year when Warren starts full-day kindergarten.

Wes and Warren are important priorities(??) for Walter and Jessica and they spend a considerable amount of their income on activities for them.  Wes has developed a keen interest in ice hockey and Warren has shown a passion(??) for baseball and soccer already.  Walter and Jessica would like to see their boys attend college or university in Ontario and would like to fund 100% of the cost.  They have started a Family RESP which they contribute to regularly.  At present, the RESP is invested 100% in the BMO Dividend Fund (class A).  They are very concerned about the rising cost of education.

They are not planning on having any more children but neither one of them wants to have an operation as a means of obtaining permanent contraception.

Walter and Jessica have enjoyed reasonably good health.  However, last monthWalterhad his annual physical and it was discovered that he has moderately high blood pressure.  His doctor was quite concerned as Walter’s family has a history of high blood pressure.  His doctor has suggested that medication is not required right now; instead he has advised Walter to begin an exercise program (30 minutes of cardio 3 times per week) and to pay close attention to his eating and sleeping habits to reduce stress from his life.  He is currently 6 ft., 4 in. tall and weighs 225 lbs.  Walter considers himself a non-smoker as he only occasionally smokes a cigar when he goes golfing with his college friends.

Jessica measures around 5 ft., 8 inches and weighs 180 lbs.  She does not smoke or drink and has a long family history of longevity with no major illnesses.  She enjoys a free gym membership at Good Life Fitness and usually works out at least 5 days a week.  In her spare time, she enjoys making stained glass art and singing.  Once or twice a year she also enjoys scuba diving when on vacation.

Walter and Jessica have wills but they have not updated them since they were married.  They would like to “leave everything” to each other in the event of death and then their two children in equal shares if one should predecease the other.  All of their bank accounts are joint and they have each listed their estate as the beneficiary of their RRSP plans. They have listed each other as successor annuitant on their TFSAs.

In the event of both of their deaths, Walter’s Mom, who lives in Thunder Bay, Ontario, has verbally agreed to care for Wes and Warren.  Jessica’s brother Matthew, who lives in London, Ontario, has also hinted that he would care for the kids if need be.

Major Assets
Warren and Jessica purchased their home jointly in London, Ontario shortly after they were married for $235,000.  They estimate that it is worth $325,000 today.  They would like to upgrade to a nicer home with a finished basement in the next few yearsif they can afford to do so.  Over the years, they have been very diligent in paying down theirmortgage and have reduced the outstanding balance to $100,000.The current interest rate on their mortgage is 4% and there are 15 years left on the amortization.

Warren and Jessica have numerous investment accounts with their financial institution, BMO Financial Group.

As listed below, Walter and Jessica each have a car.  Walter’s car (purchased in cash) is relatively new and he receives a car allowance of $300 from his employer every month. Jessica just recently purchased a 2014 Toyota Highlander so the family can have adequate space for weekend get-a-ways.

They would both like to purchase a small cottage in Kincardine, Ontario in the next 10 years but need to start saving for this.

Existing Financial Security

A few years ago after Wes was born Walter purchased a 10 year R&C term policy from Sun Life.  He pays an annual premium of $185 per year for $100,000 worth of insurance.  Walter has listed Jessica as the primary beneficiary on the policy and his Mom as his contingent beneficiary.

Walter is a member of his employer’s Group Benefits Plan through which he has family coverage.  Through the plan, Jessica, the boys (until age 21 or age 25 if full-time students), and him are entitled to group benefits from Sun Life Assurance Company of Canada which includes extended health care and dental care.  The premiums for extended health care and dental care are paid for by Old Dutch.    The plan also covers Walter for short-term disability (100% of salary) and long-term disability (60% of salary after 3 months) but Walter pays the premium ($67.24 per month) for the long-term any occupation disability coverage.  Walter has $25,000 of life insurance coverage on his life (premium paid by employer) and he has opted for supplementary life insurance of $50,000 on his life (50% of $10 monthly premium paid by employer).  He did not purchase the optional life insurance coverage on his dependents and Jessica and the boys have no other life insurance policies.

Walter is a member of his employer’s mandatory defined benefit pension plan.  He contributes 12% of his pay.  The plan is based on the average of the last 5 years of employment and will pay Walter a 1.5% credit for each year of service and is indexed to 75% of the previous year’s CPI.

The pension plan provides survivor benefits to Jessica in the event of Walter’s death.  Jessica will be entitled to a spousal pension worth 60% of Walter’s pension at the time of his death.


Monthly Cash Flow

Note: this is not complete and you should make and state assumptions where appropriate. You should also account for income tax and other items listed in the case above.

Walter and Jessica
Walter’s gross income     $6,875.00
Jessica’s gross income    $2,083.33
Mortgage Payment     $ 738.00
Groceries and pharmacy    $1,350.00
Property taxes     $400.00
Utilities    $375.00
Car insurance    $180.00
Gas    $350.00
Clothing    $150.00
Entertainment    $300.00
Phone, internet, cable    $160.00
Home insurance    $75.00
Group Supplementary Life insurance    $5.00
Group long-term disability    $67.24
RESP (Family Plan)     $220.00
Spousal RRSP for Jessica    $200.00
Pension Plan Contribution    $825.00

Other Assets, Insurance and Debts:

CARS    2012 Ford Flex
Estimated value $19,000
2014Toyota Highlander
$22,600 loan outstanding for 5 years at 5%
RESP                  (FAMILY PLAN)    $11,650
TFSAs    $8,745    $5,124
RRSPs    $15,779    $10,500 in total
-$1,500is spousal plan (Walter is contributor)
PENSIONS    Defined Benefit Plan    None
GROUP INS.    As noted above    None
(Other than Mortgage & Car Loan)
$3,567BMO MasterCard
Limit $7,500
18% interest


Walter and Jessica’s Objectives
Walter and Jessicahave come to you seeking your advice and recommendations on their life and health insurance situations. You gathered the information above in a fact-finding (Needs Analysis) appointment and are now returning with the information to answer their questions and provide solutions to the problems that you have identified.

Everyone is anxious to see that they have adequate coverage in these areas but are quite concerned about the cost.  Your job is to discuss their problem(s), if any,explain your strategies, provide specific recommendations and bring them to the implementation stage of the process.

Make sure your report to Jessica and Walteraddresses the following questions but be sure to write it as a Plan (ie. don’t simply answer the questions below).

3.  What specific, detailed recommendations would you make for:
?    Walter        (20 marks)
?    Jessica    (15 marks)

When answering this, consider:
•    Income
•    Cash flow
•    Debt (Net worth)
•    Tax implications
•    Age
•    Health

Part 1
Walter and Jessica are young couple. Walter is 34 years old, and Jessica is 33 years old. They have two boys: one called Wes who is 5 years old, another called Walterwho is 3 years old. They are live in London Ontario. Walter and Jessica bought a 10-year R&C term policy that worth $100,000 from Sun Life, and they pay $185 per year. In this insurance policy, Jessica is the primary beneficiary. Walter joins Group Benefits Plan for his family coverage. Walter purchased a long- term insurance that pays $67.24 per month for any occupation disability coverage. Walter has his life insurance that worth $25,000, and his employer pays premium. He also has supplementary life insurance that worth $50,000 on his life, and his employer also pays 50% of $10 monthly premium. Thus, Walter only has to pay $5 for group supplementary life insurance. Walter and Jessica purchased home insurance which pays $75 every month. They has to pay $180 for car insurance.


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