Case Assignment: Jack and Jill
Nishan Palakrishnan
Student Number: 101100006
George Brown College
FIN 2063: Insurance Financial Planning
Professor: Giulio Iacobelli
March 17, 2021
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I. EXECUTIVE SUMMARY
As a financial planner in risk management, it is my job to ensure Jack and Jill achieve their
financial objectives while also covering any risks they may face financially.
Jack, age 49, is the VP of marketing at his firm and is making $190,000 a year + bonus. His
bonus last year was $40,000. Jill is a privately practicing accounting that earns $100,000 after
expenses. Jack and Jill have two children, Tracy and Travis. Jack and Jill have a few objectives
they’d like to reach. They want to be able to send Tracy (whom has down syndrome) to a group
home which costs $58,250 a year. They also want to have enough money to pay for this for the
rest of Tracy’s life. Next, they want to be able to pay for Travis’ undergraduate degree and also a
graduate degree if he chooses to pursue it. The estimated cost for this is $15,000 a year for 6
years. They would also like to give Travis $500,000 after he graduates to either buy a house or
start a business. Jack and Jill’s final objective is to retire in 18 years, and in the event of their
death, their funeral expenses be paid for. This amounts to $50,000 for each of them.
II. RISK MANAGEMENT PROCESS
1. Determine Objectives

Pay for Tracy’s group home

Pay Travis’ tuition and schooling expenses

Give Travis $500,000 after he finishes school

Expenses related to death to be paid for by life insurance

Looking for long-term investment for $50,000 inherited by Jill
2. Identify Risks

Tax liabilities after death
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
Current insurance might not cover Jill’s death expenses in the event of her death

No coverage in case of accidental property damage

Accidents may make them disabled/unable to work

Loss of employment, or sickness

Unexpected death
3. Evaluate Potential Loss

Loss of employment will result in financial objectives not being met

Lack of property damage coverage opens them up to a potential for loss in the event of
property damage

Lack of accident coverage, if an accident occurs, there is a suffrage of income loss
4. Consider the alternatives and choose the appropriate risk management technique

Retain Risk

Control the Risk

Insure the Risk
5. Implement Risk Management Technique

Retain risk: $50,000 inheritance should be kept in GIC as it is low risk. GIC is also low
return but this money could be used in the near future for Travis.

Control/Insure the risk:
o Need property damage coverage to insure against damage
o Should buy accident benefit coverage to prevent from accident loss
o Purchase long-term care insurance encase of the event of a life impairing accident

Share risk: Shared GIC, in the event of someone’s death, the other can still benefit from
the joint GIC.
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III. LIFE INSURANCE
Jack
Jill
Gross Salary
Take Home Pay
$190,000 + $40,000 = $230,000
$230,000 x 65% = $149,500
# Years Insurance Needed
PVA =(THP,n,i) where i=3%
Insurance coverage at work
Insurance needed
18
$2,117,834.71
$200,000
$1,920,000
$150,000
($150,000 – $50,000) x
65% = $65,000
18
$920,797.70
0
$925,000
IV. CAPITAL NEEDS ANALYSIS
Currents Assets & Liabilities
Jack
Jill
Assets
GIC
Self-directed RRSP
LIRA
RRP
Investment Portfolio
Group Life Insurance
CV Life Insurance
RESP
Long-Term Disability
Term 10 Policy
Whole Life Policy
House
Total Assets
$91,0250
$335,011
$495,685
$200,000
$48,361
$71,415
$2,000
$1,675,000
$2,938,497
$50,000
$185,530
$75,280
$71,415
$3,800
$250,000
$25,000
$1,675,000
$2,349,989
Liabilities
Funeral Expenses
Mortgage
Total Liabilities
($50,000)
($215,000)
($265,000)
($50,000)
($215,000)
($265,000)
Capital Available
$2,673,497.00
$2,084,989.00
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If they both die at the same time:
Assets
GIC
RRSP (Jack)
RRSP (Jill)
Group Life Insurance
CV Life Insurance
RESP
House
Total Assets
$50,000
$91,025
$185,530
$200,000
$62,325
$71,415
$1,675,000
$2,335,295
Liabilities
Funeral Expenses
Schooling Expenses (Travis)
Money for Travis
Tracy Group Home (Tracy)
Total Liabilities
Capital Available
$100,000
$90,000
$500,000
$2,213,500
$2,903,500
($568,205)
If both Jack and Jill die tomorrow, they don’t have enough assets and insurance to cover the
expenses needed to fulfill their wishes. They should purchase some sort of life insurance such as
permanent life insurance, whole life insurance, or universal life insurance. Based on the policy it
will help pay for expenses needed after their death.
The death benefit that Jill received as a
Tax Implications
Isn’t taxable income, no tax implications
beneficiary of her father’s policy.
The annual increase in cash value in her
Not taxed until withdrawn
whole life policy.
The dividends she received this year from her
Dividends are taxable in the hands of the
whole life her policy.
Jack’s group life insurance premiums that are
policy holder
Not taxable to beneficiaries if the
paid by his employer.
policyholder dies.
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The drawback to this type of “creditor” life insurance is that the creditor doesn’t have access to
the funds when the insurer dies, and the insurance is paid out. The creditor only has access to
these funds when it is paid out to the estate. The policy is used as a collateral to the loan, so once
it is paid out, the creditor has the rights to pursue the beneficiary for the amount owed.
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