NAVIPLAN PREMIUM LEARNING GUIDE. Analyze, compare, and present insurance scenarios

Transcription

1 NAVIPLAN PREMIUM LEARNING GUIDE Analyze, cmpare, and present insurance scenaris

2 Cntents Analyze, cmpare, and present insurance scenaris 1 Learning bjectives 1 NaviPlan planning stages 1 Client case 2 Analyze the clients current life insurance cverage 4 Gal Cverage graph 5 What Are My Optins? dialg bx 6 Cash Flw details 7 Create recmmendatins in an alternative life insurance scenari 8 Assumptins tab 10 Onging Expenses tab 11 Additinal Annual Incme tab 12 Lump Sum Needs tab 13 Present yur life insurance recmmendatins t yur clients 15 Multi-Year Cash Flw if <client> Dies reprt 15 Financial Plan client reprt 17 <client> - Life Insurance Scenari Summary page 17 Scenari Assumptin Cmparisn page 18 Life Insurance Summary page 19 Exercises 21 Exercise questins 21 Cnclusin 22 Answers t exercise questins 23 NaviPlan Premium resurces 24 i

3 NaviPlan Premium Learning Guide: Analyze, cmpare, and present insurance scenaris ii

4 NaviPlan Premium Resurces Analyze, cmpare, and present insurance scenaris The Analyze, cmpare, and present insurance scenaris mdule will help yu analyze yur clients life insurance needs, cmpare varius alternatives, and present a recmmended scenari t yur clients that ensures they have n life insurance shrtfalls. This mdule assumes that yu have cmpleted the Start planning mdule (available at supprt.eisi.cm/naviplan) and that yu already knw hw t create a client file. This mdule was created using the Average Tax methd. Befre cntinuing with this mdule, it is recmmended that yu cmplete the Analyze, cmpare, and create plan scenaris mdule t understand hw the Scenari Manager feature wrks. Learning bjectives Upn successful cmpletin f this mdule, yu will be able t Analyze the clients current life insurance cverage. Create recmmendatins in an alternative life insurance scenari. Present yur life insurance recmmendatin t yur clients. Nte: Each learning bjective is identified with a puzzle piece icn. NaviPlan planning stages The fllwing diagram shws the planning stages yu can fllw in NaviPlan, frm creating a client file t presenting results. The learning bjectives in this mdule are part f the fllwing stages: Analyze gals and develp recmmendatins and Present results. 1

5 NaviPlan Premium Learning Guide: Analyze, cmpare, and present insurance scenaris Client case This mdule includes practice exercises using ne f the sample clients prvided in NaviPlan. The exercises have been designed specifically fr this mdule and assume that yu are wrking with the riginal data in the Level 2 Plan named Base Plan in the Dixn, Jim & Maria client file. Thrughut the mdule, we will be using this client case as an example. The Scenari Manager feature in NaviPlan is yur main planning center that yu will use t assess yur clients current situatin (cash flw and net wrth), t determine if they are n track twards achieving their financial gals, and t create a recmmended plan with specific planning strategies t help yur clients achieve their gals, including survivr, disability, and lng-term care incme needs. As yu create a recmmended plan and ther alternative scenaris (ptinal), yu can instantly mnitr the effects f planning strategies, such as additinal insurance, n yur clients ther gals and n their cash flw and net wrth. Yu can use the client reprts t shw yur clients the benefits f purchasing additinal life insurance. The reprt cmpares the insurance shrtfall f the clients current plan with the additinal insurance amunt in yur Recmmended Plan scenari. Fr example, yur clients Jim and Maria Dixn want t knw if they have sufficient insurance cverage, shuld smething happen t either f them. Bth Jim and Maria have life insurance plicies at wrk (Jim is cvered fr $375,000 and Maria fr $300, 000). These amunts are reasnable, but are they enugh? On the next page, yu can view a reprt that yu might shw yur clients after yu ve dne yur analysis and made yur recmmendatins. 2

6 NaviPlan Premium Resurces Figure 1: Financial Needs Summary reprt Life Insurance - <client> page (Results sectin Client Reprts categry Client Reprt page) 3

7 NaviPlan Premium Learning Guide: Analyze, cmpare, and present insurance scenaris Analyze the clients current life insurance cverage On the Scenaris page (Results sectin Analyze Gals categry), yu can see whether a life insurance shrtfall exists in the current plan. Clicking the Calculate All buttn fr the Current Plan scenari updates the survivr incme percentages fr the Client, the C-Client, and Bth shwing yu whether there are insurance shrtfalls. Clicking the Review Current Plan buttn pens the Scenari Manager dialg bx where yu can analyze the clients survivr incme insurance needs further. Figure 2: Results sectin Analyze Gals categry Scenaris page Review Current Plan buttn Scenari Manager dialg bx Survivr Incme Client link In the fllwing pages, we will examine the fllwing: A. Gal Cverage graph B. What Are My Optins? dialg bx C. Cash Flw details 4

8 NaviPlan Premium Resurces Gal Cverage graph Figure 3: Scenari Manager dialg bx Survivr Incme Client link (shwing Survivr Incme - Client details) Key pints Gal cverage is the percentage f all cash utflws that can be cvered using all resurces thrughut the survivrship perid. In the Current Plan scenari, the Gal Cverage graph allws yu t review the effects f the clients existing plicies and strategies. The Current Plan scenari fields are read-nly because this scenari reflects the data that was entered primarily n the Set Gals sectin Survivr Incme categry Client Objectives pages, as well as in the Enter Financial Data sectin. The Current Plan scenari can nly be mdified by entering changes thrughut the plan, nt in the Scenari Manager dialg bx. If yu selected the Client(s) are already retired check bx when yu created the plan, unnecessary items will be hidden, including the fllwing items n the Assumptins tab: Survivr Retirement Age ROR n Cash Flw Surpluses & Liquidatins Pre-retirement Our sample client, Jim Dixn, nly achieves 57% gal cverage, indicating a need t either purchase additinal life insurance fr Jim, r t adjust Maria s survivr needs. 5

9 NaviPlan Premium Learning Guide: Analyze, cmpare, and present insurance scenaris What Are My Optins? dialg bx Figure 4: Scenari Manager dialg bx Survivr Incme Client link What Are My Optins? buttn What Are My Optins? dialg bx Key pints The Buy Additinal Insurance ptin shws the amunt f insurance required t achieve 100% gal cverage. Because the Current Plan scenari is readnly, the Buy Additinal Insurance ptin is nt accessible. The suggested additinal cverage value may nt be feasible fr yur clients. They may want t cnsider changes t their survivr incme needs. Fr example, they may need t reduce the percentage f lifestyle and medical expenses t be cvered during survivrship. Hwever, yu cannt enter recmmendatins in the Current Plan scenari. All recmmendatins must be made in ne f the alternative plan scenaris. 6

10 NaviPlan Premium Resurces Cash Flw details Figure 5: Scenari Manager dialg bx Cash Flw link (shwing Cash Flw details) Key pints T see if yur clients can affrd the additinal premiums required, yu can click the Cash Flw link in the Scenari Manager dialg bx. The Cash Flw Surplus/Deficit graph shws the clients cash flw situatin. If yu selected the Client(s) are already retired check bx when yu created the plan, the cash flw gal cverage (the zm link) fr Pre-retirement will be hidden. Yu can use the gal cverage fr Retirement t mnitr yur clients cash flw situatin. Our clients, Jim and Maria Dixn, have nly surpluses, nt deficits. It lks like they can affrd sme additinal insurance premiums. Nw that we have established that a shrtfall des exist in the event f Jim s death and that the Dixns can affrd sme additinal insurance premiums, let s take a lk at the Recmmended Plan scenari t see hw we might imprve Maria s incme r reduce her incme needs in survivrship. 7

11 NaviPlan Premium Learning Guide: Analyze, cmpare, and present insurance scenaris Create recmmendatins in an alternative life insurance scenari If the Asset Allcatin mdule is included in the plan, the Recmmended Plan scenari assumes assets will be reallcated based n the suggested asset mix. As a result, gal cverage in the Recmmended Plan will be different frm the Current Plan scenari, even befre yu make any changes. If yu have already slved ther gals fr the clients in this scenari, the data in the Mdify Financial Data and Analyze Gals sectins f the Scenari Manager dialg bx will reflect thse changes, such as additinal savings. Clicking the Edit Recmmended Plan buttn n the Scenaris page pens the Scenari Manager dialg bx Recmmended Plan - Alternative 1 tab. Nte that mst fields n this tab are accessible. The Recmmended Plan scenari is where yu can experiment with varius slutins t cme up with yur recmmended scenari. Under Analyze Gals Survivr Incme n the left, yu can click links fr the Client, C-Client, r Bth. The crrespnding survivr incme details appear. Figure 6: Scenari Manager dialg bx Survivr Incme Client link (shwing the Survivr Incme - Client details) Clicking the What Are My Optins? buttn will shw yu the additinal insurance required t meet the shrtfall. Yu can use the Death Benefit slider bar t add additinal insurance cverage and watch hw it changes gal cverage, net wrth, and cash flw. If yu use the slider bar t add insurance, a whle life plicy is autmatically created and can be accessed by clicking the Insurance Cverage link. T add a different type f plicy In the Scenari Manager dialg bx, click the Insurance Cverage link, and then enter the plicy details. T see whether the clients can affrd the additinal premiums In the Scenari Manager dialg bx, click the Cash Flw link, and then review the cash flw details. 8

12 NaviPlan Premium Resurces Figure 7: Results sectin Analyze Gals categry Scenaris page Edit Recmmended Plan buttn Scenari Manager dialg bx Survivr Incme Client link n the Recmmended Plan tab In ur Dixn example, we will add a $1,280,000 death benefit using the slider bar, with a $250 mnthly premium. As well, we will reduce the expected return rate frm 6% t 4% fr bth the pre-retirement and retirement perids since we ve already created ptimal slutins fr the Dixns ther gals, and we want t invest the lump-sum insurance payment cnservatively. Nte: If yu selected the Client(s) are retired check bx when yu created the plan, the Return Rate Pre-retirement field will be hidden. In the fllwing pages, we will examine the fllwing tabs fr Survivr Incme - Client in the Scenari Manager dialg bx: A. Assumptins tab B. Onging Expenses tab C. Additinal Annual Incme tab D. Lump Sum Needs tab 9

13 NaviPlan Premium Learning Guide: Analyze, cmpare, and present insurance scenaris Assumptins tab Figure 8: Scenari Manager dialg bx Survivr Incme Client link Assumptins tab Key pints On this tab, yu can edit the survivr s retirement age r life expectancy fr the insurance scenari. Fr example, Maria s family generally has lnger life expectancies than mst, s t ensure adequate cverage yu may want t base the life insurance recmmendatin n the assumptin that Maria may live t age 100. Nte that changing life expectancy r retirement assumptins may affect gal cverage, as well as cash flw and net wrth values. If yu selected the Client(s) are already retired check bx when yu created the plan, unnecessary items will be hidden, including the fllwing: Survivr Retirement Age ROR n Cash Flw Surpluses & Liquidatins Pre-retirement In the Dixn case, changing Maria s life expectancy t 100 decreases gal cverage and the life insurance shrtfall still exists. Net wrth is nt affected because nly lifestyle assets remain and they are nt used t cver the life insurance shrtfall. 10

14 NaviPlan Premium Resurces Onging Expenses tab Figure 9: Scenari Manager dialg bx Survivr Incme Client link Onging Expenses tab Key pints Yu can use the Percentage f lifestyle and medical expenses t cver field t quickly change annual expenses during survivrship. Fr example, if the surviving spuse is likely t return t wrk, sme expenses may increase r decrease. The default Percentage f lifestyle and medical expenses t cver value is 85%, but this value can be verridden. Clicking the Educatin Expenses buttn pens the Educatin Expenses dialg bx where yu can review (and verride) educatin expenses entered in the plan. Specific expenses ften ccur after a death, such as daycare expenses fr children if a stay-at-hme parent dies, extra csts fr befre-and-after schl prgrams, yard care, and expenses resulting frm a parent returning t wrk (wrk clthes, transprtatin). Yu can enter specific expenses that may apply when the client dies by clicking the Add Additinal Expense buttn. A data-entry rw appears where yu can enter details abut the expense. If yu selected the Client(s) are already retired check bx when yu created the plan, the default End Date fr all expenses will be the retirement f the survivr. Yu shuld adjust the End Date t ensure it ccurs in the current plan year r later. In the Dixns case, yu may want t suggest tw things: (1) Maria will require abut 80% f the cuple s expenses t be cvered in survivrship, since she is currently wrking and earning a salary. (2) Jim and Maria want t ensure that their daughter Sphie s educatin csts are cvered, n matter what happens, s they want t leave the educatin expenses as they are. 11

15 NaviPlan Premium Learning Guide: Analyze, cmpare, and present insurance scenaris Additinal Annual Incme tab Figure 10: Scenari Manager dialg bx Survivr Incme Client link Additinal Annual Incme tab Key pints Clicking the Add Additinal Annual Incme buttn adds a new data-entry rw where yu can enter any extra incme the surviving client may receive during survivrship. Fr example, the surviving spuse plans t return t wrk r t get a secnd jb t supplement incme. Clicking the event calendar buttn beside Start Date and End Date allws yu t define these dates based n events such as retirement r death. Yu can use the Offset values t add r subtract years frm the event. If yu selected the Client(s) are already retired check bx when yu created the plan, the default End Date fr any additinal incmes will be Death. Maria tells yu that if Jim was t die she wuld very likely take a part-time sales jb ding in-hme parties. She thinks that she culd earn abut $15,000 annually. 12

16 NaviPlan Premium Resurces Lump Sum Needs tab Figure 11: Scenari Manager dialg bx Survivr Incme Client link Lump Sum Needs tab Key pints By default, all liabilities in the plan are paid ff at death, but n this tab yu can verride this if necessary. Fr example, if the client can deduct the interest n a lan frm taxes, they may nt want t pay ff the lan. If a lan is insured fr life (the Insured fr life ptin is selected frm the Payff Optins at Death list in the Liability Details dialg bx), this means the plicy is held utside the plan. NaviPlan will pay ff the lan by including a cash inflw representing the lan insurance benefit the clients wuld receive, which is ffset by the lan balance. Clicking Majr Purchase Gals shws any majr purchase gals entered in the plan. By default, majr purchase gals are cvered 100%, but yu can verride the percentage. Fr example, if the clients are planning a vacatin, perhaps the vacatin wuld be canceled if ne f them died. Clicking Additinal Lump Sum Needs allws yu t enter additinal lump-sum needs, such as funeral and burial expenses, csts t cver time ff while grieving, r t bring family members hme fr the funeral. 13

17 NaviPlan Premium Learning Guide: Analyze, cmpare, and present insurance scenaris Based n the Dixns current gal cverage and cash flw situatin, the changes we ve made t the Recmmended Plan scenari s far are still nt enugh. We can use the What Are My Optins? dialg bx t determine the additinal insurance amunt needed t cver the shrtfall, add that amunt, and then add $100/mnth t the insurance premiums. Figure 12: Scenari Manager dialg bx Survivr Incme Client link (shwing the Survivr Incme - Client gal slved) Nte: If yu selected the Client(s) are already retired check bx when yu created the plan, unnecessary items such as Return Rate Pre-retirement will be hidden. Nw that ur recmmendatins are cmplete (gal cverage is 100%), it s time t present ur recmmendatins t the clients. 14

18 NaviPlan Premium Resurces Present yur life insurance recmmendatins t yur clients There are tw different types f utput that yu can use t sell yur recmmendatins t yur clients: stand-alne reprts and client reprts. In this learning bjective, we will review a stand-alne reprt as well as a few pages frm a client reprt. We will lk at the A. Multi-Year Cash Flw if <client> Dies reprt B. Financial Needs Summary client reprt Multi-Year Cash Flw if <client> Dies reprt Using the Multi-Year Cash Flw if <client> Dies reprt, yu can shw the Current Plan and the Recmmended Plan survivr incme scenaris side by side, making it easy t shw the benefits f yur recmmendatins, which eliminate shrtfalls. T see bth scenaris in this reprt, fllw these steps: 1. G t the Reprts menu, and then select Insurance Life Insurance Multi-Year Cash Flw if <client> Dies. The reprt generates. 2. Click the Duplicate buttn at the tp f the reprt. The reprt duplicates. 3. Under Reprt Settings, select the applicable scenari types: Current and Recmmended. 4. Click the Apply Settings buttn at the bttm f the reprt. The infrmatin in the applicable reprt updates. 15

19 NaviPlan Premium Learning Guide: Analyze, cmpare, and present insurance scenaris Figure 13: Reprts menu Insurance Life Insurance Multi-Year Cash Flw if <client> Dies Multi-Year Cash Flw if <client> Dies reprt 16

20 NaviPlan Premium Resurces Financial Plan client reprt <client> - Life Insurance Scenari Summary page Figure 14: Financial Plan client reprt <client> - Life Insurance Scenari Summary page (Results sectin Client Reprts categry Client Reprt page) Key pints This graph shws the benefits f the Recmmended Plan (prpsed) scenari ver the Current Plan scenari. In the Dixn example, the life insurance shrtfall is met. 17

21 NaviPlan Premium Learning Guide: Analyze, cmpare, and present insurance scenaris Scenari Assumptin Cmparisn page Figure 15: Financial Needs Summary client reprt Scenari Assumptin Cmparisn page Key pints This page helps yu pint ut the changes that were applied t the Current Plan scenari t imprve gal cverage. If yu selected the Client(s) are already retired check bx when yu created the plan, unnecessary items will be hidden in this reprt, including the fllwing: Survivr Retirement Age Ttal ROR n Additinal Insurable Need Pre-Retirement Ttal ROR n Cash Flw Surpluses & Liquidatins Pre-Retirement 18

22 NaviPlan Premium Resurces Life Insurance Summary page Figure 16: Financial Needs Summary client reprt Life Insurance Summary page Key pints Additinal Recmmended Cverage shws the additinal cverage amunt needed t meet cash flw shrtfalls until the death f the surviving spuse. Life insurance benefits are assumed t be paid ut immediately when calculating future shrtfalls in cverage. 19

23 NaviPlan Premium Learning Guide: Analyze, cmpare, and present insurance scenaris 20

24 NaviPlan Premium Resurces Exercises The exercises in this mdule were created using the Jim and Maria Dixn client file. Befre starting the exercises, g t the Client Management sectin Client List categry Clients page, and then pen the Dixn, Jim & Maria client file. On the Plans page that pens, duplicate the plan named Base Plan, rename the duplicate with a meaningful name, and then use the duplicated plan t cmplete the fllwing exercises. Exercise questins 1. Jim s emplyer has decided nt t renew the cmpany s grup term life insurance, which expires at the end f the mnth. As an ptin, Jim can cnvert his grup term cverage int an individual plicy r purchase a new individual whle life plicy. Jim ultimately decides t purchase a whle life plicy. Jim will make an initial depsit t the CSV when the plicy is purchased. Yu estimate that the balance f the CSV will be $3,000 at the start f next year with an annual grwth rate f 4%. Hw wuld yu mdel this scenari in Jim and Maria s financial plan? The plicy details fr the whle life insurance plicy include the fllwing (maintain defaults fr any fields nt specified): Beneficiary: Maria Benefit: $300,000 Premiums: $140/mnth Cash Surrender Value: $3,000 CSV Payable with Death Benefit: Yes 2. Since yu made changes t the Dixns life insurance plicy details, generate the Insurance Plicy Summary reprt t cnfirm that yur entries are crrect befre analyzing the Dixns insurance needs. 21

25 NaviPlan Premium Learning Guide: Analyze, cmpare, and present insurance scenaris Cnclusin Upn successful cmpletin f this mdule, yu are nw able t Enter yur clients existing life, disability, and lng-term care insurance plicies. Review utput t verify the accuracy f the plicies. Describe NaviPlan assumptins fr life, disability, and lng-term care insurance. 22

26 NaviPlan Premium Resurces Answers t exercise questins 1. On the Enter Financial Data sectin Insurance Cverage categry Insurance Cverage page, yu wuld click the Details buttn t mdify Jim s grup insurance as fllws: Edit the life insurance plicy details. On the Details tab fr the existing term plicy, edit the fllwing fields t change the plicy t a whle life plicy: Plicy Type: Whle Life Death Benefit: $300,000 Cash Surrender Value: $3,000 CSV Payable with Death Benefit check bx: selected Amunt: $140 Frequency: Mnthly Nte: Leave all ther fields at their default settings. Edit the cash surrender value grwth rate. On the Future Values tab fr the new whle life insurance plicy, enter the fllwing changes t ensure the estimated CSV increases each year: Select the Mdify the Calculated Values check bx. Frm the Clumn t Fill list, select the Estimated CSV ptin. Leave the Start Year and End Year default values. In the Start Value field, enter $3,000. In the Base Rate field, enter 4%. In the Perid (years) field, enter 1. Click the Fill buttn. Click OK. 2. G t the Reprts menu, and then select Insurance Life Insurance Insurance Plicy Summary. 23