Risk Management and Insurance Planning - Desklib

This report discusses the prevailing issues and opportunities for a client named Eric in terms of risk management and insurance planning. It provides recommendations to guide him in making better decisions to augment his wellbeing.

Risk Management and Insurance
Planning

Table of Contents
INTRODUCTION...........................................................................................................................3
ISSUES AND OPPORTUNITIES..................................................................................................3
RECOMMENDATIONS.................................................................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
The client Eric is now 35 years old and he is expecting his first baby at this age. If sees his
current insurance coverage, then it seems to be around 863332 USD. It covers all aspects such as
group medical insurance, home insurance and life insurance. The client’s life expectancy is
around 68 years. Since it is now around 35 and having adjustment in his life of 10 years due to
his bothersome life. The projected income and expenses of this client in the event if one of the
spouse dies is 257900. If discusses the health history of the family, then there are no such
concrete evidence suggesting anything bothering. He is still having his parents who seems to be
fit and are eligible to take care of his expected child. There is no severe ailment to any of them
and their parents which shows that the family is not supposed to be much aware for any health
jeopardy. The report will be discussing some prevailing issues along with opportunities before
the client so can guide him for taking better decisions to augment the wellbeing (Armin, et. al.
2019)
ISSUES AND OPPORTUNITIES
The client is having some issues. Since he is around 35 and having a lots of responsibilities to
perform. As it is known that he has owned a house with his neighbour and for this purpose he
raised both down payment and mortgage which are to be paid back in the next 25 years. if the
life expectancy is supposed to be 68 then it seems quite perilous for the man due to many
associated reasons (Huang, 2021) The life expectancy is as-
Life expectancy of Eric
Particular Value
Gander Male
Current age (C ) 35
Life style habits
Feels rigors responsibility both
financially and mentally.
Adjustments factors (F) 10
Life expectancy to age form security table (X) 43
Life expectancy (C+X-F)
Life Expectancy 68
Assumption

The adjusted factor has been taken using prevailing demographical dynamics into consideration.
The above stated table shows that the man is having less time to payback his debts.
There is another issue is about cash flows since he is supposed to pay a range of expenditures in
the upcoming time the cash flows or projected income in case any of the spouse losses its life is
as-
Client's projected income and expenses in the event that one spouse dies
prematurely.
Expenditure for the year
Total
expenditures
annual expenditure for
Eric.
Mortgage loan payment for the year 900000 18000
Down payment expenditures 30000 600
Property tax 8000 4000
Housing cost 900 5400
home insurance and repair cost 900 5400
student loan 25000 25000
credit card payment 5000 5000
monthly payment 2500 2500
living expenditures and mortgage payments 35900
other fixed expenditures 30000
Income for the year (added the savings for months) 37900
insurance cover for Eric 250000
income if Eric passes away 287900
Total projected income of the client if one spouse dies
prematurely 257900
This is a big issue since there are range of expenditures are to be made and it would not be handy
for a single one to pay off these all. Since the income amount of 250000 is a lump sum payment
which is not supposed to be occurred on regular interval (Keegan, 2020)
The conclusion can also be drowned that at this point the client is not having appropriate type of
insurance since it is giving it age for only the first year of demise then would not be supported.
There are some opportunities too which are there for the client-

It may go for better kind of insurance policy which covers better and for longer since the present
insurance would not help him to cover all the losses. In case he demises then for the first year
only it will be possible to pay off all the debts and dues but in the following years his family
would suffer a lot.
At the same time, he has some plans such as buying car after birth of the kid, then wants to save
a big sum so can give his/her a better educational career. For this aim the need of making better
plan cannot be denied. This amount is intended to be around $160000 (Cardon, 2020)
There is need to have a risk management policy since the client is having some issues with his
overall insurance cover and there are range of responsibilities are to be performed. He is intended
to hike his monthly expenditure by $500 after birth of the child.
RECOMMENDATIONS
1. Risk avoidance= This plan is found the most suitable one. Eric may avoid some risks.
For instance, he may have special plan for making payment of home. It would cost him yet in
case his death the family would be able to pay off. Firstly, he must pay student loan of $25000
and dues on credit card $5000. By this method may avoid the risk
Advantage= This is feasible plan and helps in avoidance of losses.
Disadvantage= additional funds, and will cost more.
2. For the kid may have educational plan= There are some policies available which will
support him. He strives to save $160000 when the kid turns to 18 so should start saving his funds
from now.
Advantages= It will protect the child and his future, will help to reduce burden.
Disadvantages= Per month savings would be disappeared.
3. He may go with some new policies= The present policy is not giving him much
coverage as it can be seen below-
Insurance coverage of the client
Types of insurance amount of insurance
1 Group medical insurance coverage
$
13,332.00
2
Eric's life insurance policy by his
company
$
250,000.00
3 Home Insurance
$
600,000.00

Total coverage by the insurance
policy
$
863,332.00
Assumptions
The group medical expenditures are taken as the average expenditures
in Canada.
The home insurance is supposed to cover the maximum amount of the home which is 1.2
million USD.
The home is owned by two people so for the client it has been divided
by 2.
Advantages= the policy will give more coverage. Will also reduce the tension of default.
Disadvantages= Extra cost will be needed (Bushnik, Tjepkema & Martel, 2018)
CONCLUSION
Here, the client is recommended to go for some actions as below-
 It is recommended to the client that he must opt a better policy which gives him more
coverage. For fulfilment of this purpose he may check out the available plans and may
subscribe the most suitable one.
 The risk management for safety of debts is also needed. He should strive to reduce the
monthly expenditures and may subscribe some better savings to enshrine the educational
expenditures for his child.
 Some fixed dues such as credit card dues and educational expenditures must be paid
primarily. It would disburden him and will be able to approach his goals.
 At the same time, Eric is also recommended to obtain some better house loan option. It is
supposed to pay a big sum for next 25 years. in such case it becomes complicated. Here,
the man may use the house in commercial manner to reduce the burden and may be able
to generate more revenues.
As the above analysis has been made shows that there are some shortcomings in his prevailing
plan so by imparting the suggestions he would be able to cut down the cost and may be able to
reduce the risks.

REFERENCES
Armin, M., et. al. (2019). Landslide zoning and its risk management plan in Kohgiluyeh and
Boyerahmad province using Haeri-Sami model. Quantitative Geomorphological
Research, 7(4), 176-196.
Keegan, C. (2020). The introduction of lifetime community rating in the Irish private health
insurance market: Effects on coverage and plan choice. Social Science & Medicine, 255,
113006.
Cardon, J. H. (2020). Loss aversion and health insurance plan switching. Journal of Economic
Behavior & Organization, 180, 955-966.
Bushnik, T., Tjepkema, M., & Martel, L. (2018). Health-adjusted life expectancy in Canada.
Ottawa: Statistics Canada.
Huang, J. (2021, March). Analysis of Risk Management Plan of Finance Section. In 6th
International Conference on Financial Innovation and Economic Development (ICFIED
2021) (pp. 652-656). Atlantis Press.
Online Available:
Life Expectancy Calculator
https://www.wallstreetmojo.com/life-expectancy-calculator/#:~:text=Life%20Expectancy
%20%3D%20C%2B%20X%20%E2%80%93%20F,current%20age%20of%20the%20individual
Life expectancy at various ages, by population group and sex, Canada.
https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1310013401
How does Canada’s health spending compare?
https://www.cihi.ca/en/how-does-canadas-health-spending-compare#:~:text=Canada%20is
%20among%20the%20highest,the%20United%20States%2C%20at%20%2413%2C590.