Running Head: FINANCE AND ACCOUNTING CASE STUDY 1

Finance and Accounting Case Study

Student’s Name

University Name

Date
FINANCE AND ACCOUNTING CASE STUDY 2

Table of contents

Requirements ............................................................................................................................. 3

Question a: ................................................................................................................................. 3

Question b: ................................................................................................................................. 3

References ................................................................................................................................. 5

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FINANCE AND ACCOUNTING CASE STUDY 3

Requirements

Question a:
The additional life insurance for Sam and Susan that is calculated through the income method
and expenses method gives different figures. It is seen that there is a two separate formula for
calculation of the additional life insurance. The income method usually consists of individual
income for both of them. As they both have separate amounts of income, their income is
summed up to estimate the overall income for the whole family (Diacon, 2016). It is read that
both of them are thirty-five years of age and they have a goal to retire the age of sixty-five.
Considering their present age their age of retirement the difference in the two ages provides
the numerical value for the working span that is termed as the time left for their retirement. So
the formula for calculating the additional life insurance under income method multiplies the
overall income of the family that comes to 85000 dollars multiplied by the 30 years. As per the
income method, they need 2550000 dollars as an amount of life insurance.

On the other hand, the expenses method considers the present expenses and the savings that
they make to support their future needs. Their main expenses are the employers' expenses and
the car and home insurance premium. These expenses are the chargeback's for the amounts
saved to date called RESP, TFA's and CPP. The respective amounts for such contributions like
10000 in RESP, 40000 in TFSA, 4000 in RESP and finally the car and home insurance
premium each of rupees 100 dollars are considered. Considering these and keeping the income
constant the expenses are deducted from the income and finally, the amount is multiplied with
a 3 % discounting rate and the years left for them to retire (Tselentis, Yannis & Vlahogianni,
2016, p.362). So the amount comes up 67320 dollars under the expenses method. The type of
insurance they need is life insurance that could support one another during the untimely death.

Question b:
According to the basic risk management process, there are five steps. The steps involve
identification, analysis, proper ranking, and proper treatment of the risk and monitor and
reviewing the risk (Abdel-Basset et al. 2019, p.489). Moreover, risk management involves
aspects like prevention of risk, shifting of risks, sharing of risks and finally assumption
(Lundgren & McMakin, 2018). So, concerning these aspects and steps, the couple Sam and
Susan need some other types of insurance apart from the ones present. The main insurance
that they need is a health plan. Though they are healthy and do not smoke but still to prevent

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FINANCE AND ACCOUNTING CASE STUDY 4

any unforeseen health disorder, the couple needs health insurance. The main insurance that
they need is mortgage insurance. After subtracting their present expenses from the amount they
saved there is a deficient to pay off the mortgage loan amount of 200000. The amount that they
need is 140200 dollars. They need to insure this amount with insurance. Finally, the couple
needs to make a growth fund that would help in higher education for their children. They need
to keep additional money for their children's higher education and protect the lives of their
offsprings in time of an untimely demise of their parents. They can reduce their unnecessary
insurance like the car insurance premium expenses and allocate that amount to pay for the
mortgage loan.

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FINANCE AND ACCOUNTING CASE STUDY 5

References
Abdel-Basset, M., Gunasekaran, M., Mohamed, M., & Chilamkurti, N. (2019). A framework
for risk assessment, management and evaluation: Economic tool for quantifying risks
in supply chain. Future Generation Computer Systems, 90, 489-502.

Diacon, S. (Ed.). (2016). A guide to insurance management. Springer, Retrieved from

https://www.palgrave.com/gp/book/9780333374399

Lundgren, R. E., & McMakin, A. H. (2018). Risk communication: A handbook for

communicating environmental, safety, and health risks. John Wiley & Sons, Retrieved
from https://www.wiley.com/en-
us/Risk+Communication%3A+A+Handbook+for+Communicating+Environmental%
2C+Safety%2C+and+Health+Risks%2C+6th+Edition-p-9781119456155

Tselentis, D. I., Yannis, G., & Vlahogianni, E. I. (2016). Innovative insurance schemes: pay
as/how you drive. Transportation Research Procedia, 14, 362-371.