Question

You are to develop a risk management plan for the Pierce family. Your plan should incorporate insurance and noninsurance recommendations. Provide a complete explanation of your assumptions. Remember to make the work your own. Case facts: Joe, 37, self-employed carpenter, four employees, nets $60,000 per year Anita, 37, part-time nurse, earns $30,000 per year Children: Nathan (12), Isaac (10), Charlotte (6), Lydia (3) Assets, in $ Personal Cash 12,000 Mutual funds 8,000 IRAs 15,000 401(k) 28,000 Car 20,000 ATV 5,000 Boat 10,000 Personal property 95,000 Home 245,000 Business Truck 30,000 Tools & materials 60,000 Liabilities Credit cards 6,000 Car 15,000 Home 168,000 Step 1: Identify and evaluate the risks faced by this family. (1/2 page) Step 2: Explain the noninsurance risk management techniques you recommend for this family. (1/2 page) Step 3: Recommend and explain appropriate insurance coverage for this family. (1/2 page) Step 4: Explain the retirement planning options you would recommend for this family. (1/2 page) Step 5: Explain the estate planning options you would recommend for this family. (1/2 page)

Answer 1

The Current Assets of the family = $60,000 + $30,000 + $12,000 + $8,000 = $110,000

Where as the current liability = credit card payment + home loan payments + car loan payments

The total Loan remaining = $15,000+$168,000 = $183,000

Lets assume the interest rate is 10% and the time period remaining to pay the loan is 60 months, the monthly , the emi per month would be approx $4,200 which can easily be met through the current earnings

The family has four children and the expenditure on their lifestyle (education, clothing, necessity etc) = $20,000

The total family expenditure including all is equal to $40,000

This the total risk that family has as of now which means that the family is a good position in terms of risk analysis and can invest the savings in the funds.

The Family can opt for investing in bonds which would give a fixed set of return to the family and they would be in a better position to manage all the financial needs of the family. This is one of the less riskier securities to invest in which guarantee a fixed set of return