FPC004 Insurance Advice - Assignment 2

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Section B

Question 1 (35 marks | Word limit: 1,000 words)

It is the 1 January 2020. You have just met with a new client who was referred to you for advice on her life insurance needs. She has completed a fact find with the following information.

Sophia is age 38 and has one son, Rico, who is age 11. She works as a commercial artist and earns a salary of $95,000 p.a. Her employer pays 9.5% superannuation guarantee contributions into its default superannuation fund, which has a current balance of $100,000. Sophia has no personal insurance cover (although her superannuation fund offers life, TPD and salary continuance insurance options).

After her husband died a year ago, Sophia used his life insurance payout to reduce debts to a more manageable level. She and Rico still live in their family home (estimated value $1,000,000). There is a remaining mortgage of $250,000. Sophia also has a car loan of $10,000 and credit card with a limit and current balance of $5,000. There is $50,000 in a cash management account, which is a combination of the remaining life insurance payout and Sophia’s savings towards Rico’s secondary school fees.

(a) (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. (11 marks)

(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). (5 marks)

(iii) Evaluate changes to rules on agreed value income protection and their possible impact for Sophia given her reluctance to commit to this now. (9 marks)

(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. (10 marks)

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