Task:

Question 1

1: Critically analyse personal and small business risks.

Consider the following pieces of information:

• There were around 25.5 million active life insurance policies in Australia in 2018, according to APRA. 

• There were approximately 12.5 million working-aged Australians (aged 15–64) in 2018, according to the Australian Institute of Health and Welfare.

• Rice Warner’s Underinsurance in Australia 2017 report estimated that 94% of working Australians had some level of life cover, with an average of approximately $143,500 (twice the median household income).

• Rice Warner’s Underinsurance in Australia 2017 report concluded that the amount required for a family to be adequately covered by life insurance, is around eight times the family income.

Question 2

Apply financial planning practice while giving consideration to ethics and the legal and regulatory responsibilities owed by the adviser and the adviser’s organisation to the adviser’s clients and other stakeholders.

Compare how the application of the Competition and Consumer Act 2010 (Cth) and the Corporations Act 2001 (Cth) apply in the context of providing consumer protection to someone who receives financial advice about selecting and implementing life insurance in Australia. Illustrate your answer with examples of situations in which these laws may be called upon by clients.

Question 3

Evaluate contemporary issues in insurance advice. 

Consider a recent natural disaster and evaluate the implications for policy retention when an insurer is experiencing underwriting losses

Section B

1.(i) Develop a recommendation for full lump sum life cover for Sophia. Ensure you provide full substantiation of your calculations. You do not need to apply a discount for future values.

(ii) Outline the premium strategy that would be most appropriate for Sophia, and in substantiating your answer, ensure you provide the advantages and disadvantages of the different premium options available (premiums are not required to be calculated or shown).

(iii) Evaluate changes to rules on agreed value income protection and their possible impact for Sophia given her reluctance to commit to this now. 

(b) Outline the step-by-step process of how you would present and implement this advice with Sophia. This includes your client engagement, compliance and legislative requirements as well as the underwriting process. 

LO2: Describe and distinguish the features of the various types of personal and business insurance products, including related policy documentation and taxation issues.

Jordin (27) and Dana (28) run a business as co-directors and owners of a small company, Sparkle. They are equally important to the income of the business and are considering taking out insurances to protect them both, in the event that something happens to either of them. Describe to them the various tax implications of the following strategies for ownership of life insurance:

(i) a term life insurance policy owned and purchased by Dana 

(ii) an income protection owned by Jordin, with Sparkle paying the premium

(iii) a trauma policy owned and paid for by Jordin 

(iv) a key person life insurance policy owned by Sparkle that is intended to replace lost revenue in the event that either Jordin or Dana dies or is totally and permanently disabled

Question 3

LO2: Describe and distinguish the features of the various types of personal and business insurance products, including related policy documentation and taxation issues.

This question is a research exercise. Obtain a product disclosure statement (PDS) or information pack from a supplier of life insurance. The PDS or information pack should include a range of product options, including life insurance, TPD and trauma insurance. Provide the name and version of the PDS obtained.

Use these documents and additional research to answer the following:

(i) Describe the circumstance in which a claim can be made for trauma. Under what circumstances would a benefit not be paid for trauma? (5 marks)

(ii) Describe the various policy structures available for trauma insurance. (5 marks)

(iii) Outline the policy benefits available in the trauma policy and circumstances that they can be paid in. Distinguish between full and partial benefits as well as other additional benefits of note. 

Question 4

LO2: Describe and distinguish the features of the various types of personal and business insurance products, including related policy documentation and taxation issues.

This question is a research exercise. Use available print and web resources, including product disclosure documents, to address the following questions. Your answer should reference the product disclosure documents and other documentation used.

(a) Compare and contrast life insurance products and personal accident insurance.

(b) Orlando is a 26-year-old qualified electrician from Nimbin, NSW. He is in excellent health, lives on a farm and works as a sole trader. He has limited income as he mostly works under the barter system where he takes goods or services in return for his work rather than cash. This also means that the number of hours he works each week varies considerably. His greatest fear is that he has an accident while working that would prevent him from being able to perform his job and hence, he would need income because he would have nothing to barter with. Explain how a personal accident policy may be more appropriate for him as opposed to an income protection policy, and why he may not be able to rely on workers compensation. 

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