Life, Disability, and Health Insurance Strand
Assignment TwoThis assignment assesses your competency in terms of the following unit standards:
31867 (Part) Apply knowledge of life, disability, and health insurance products and services to meet client needs
By the end of the assignment the candidate will be able to:
- (LO1 PC 1.1 to 1.3) apply knowledge of life, disability and health insurance products and services to meet client needs;
- (LO2 PC 2.1, 2.2, 2.3, 2.4) apply knowledge of adviser and client circumstances that are relevant to creating life, disability and health insurance solutions that meet client needs.
Instructions:
1. Answer all the questions in the space provided below.
2. Where applicable, you will be instructed on how many answers are required, e.g., minimum of two (2).
3. For many questions, an example has been provided for you. This is to indicate the type of answer and level of detail that is required.
4. Instances of academic dishonesty (e.g. plagiarism) will not be tolerated and will be subject to disciplinary action.
5. Submit your assignment in Word format via your assignment portal on Radar. You have already been emailed a user guide with step-by-step instructions on how to upload your assignments.
6. Please contact support@strategi.ac.nz OR assessor@strategi.ac.nz should you require any assistance.
Assessment schedule:
Assessment Tasks First attempt Second attempt Third attempt
Task 1 Part 1 31867 PC 1.1 to 1.3 (Part)
1.1
1.2
Task 1 Part 2 31867 PC 1.1 to 1.3 (Part)
2.1
2.2
2.3
Task 2 31867 PC 2.1
Scenario 1
Scenario 2
Scenario 3
Scenario 4
Task 3 31867 PC 2.2
a
b
c
Task 4 31867 PC 2.3 and 2.4
S1 part 1
S1 part 2
S2 part 1
S2 part 2
S3 part 1
S3 part 2
Task 1 (31867 1.1 – 1.3)
This Task uses Case Study Two (Jaco and Annika Botha), located in the Assignment Resources section on Radar.
Part 1
Read carefully through the case study. Based on Jaco and Annika’s circumstances, in the table below:
(i) identify two (2) life, disability or health products
(ii) recommend the products’ features, benefits, structures that meet (or better meet) the needs and circumstances of Jaco and Annika, and
(iii) explain, in your own words, how those products meet their needs and circumstances, and outline any associated risks or limitations of these. You may include existing insurance arrangements as part of your recommended solutions.
An example has been completed for you.
Identify two (2) life, disability of health products and/or features, benefits and structures to recommend. Explain how these might meet the needs or circumstances of these clients
(Minimum of 1 need) Outline a possible risk or limitation associated with this recommendation (if applicable)
(Minimum of 1 risk or limitation)
Add extra life cover to existing covers To cover the extra liabilities created by the extended mortgage limit and need to ensure retirement savings for each other are fulfilled if they die before retirement.
By using current insurer, a new discount band may be reached, and which would improve cost effectiveness. 1. Non-disclosure at application or picking up non-disclosure from previous application.
1.
2.
Part 2
Advisers can adjust the specific terms of life, disability and health insurance products and services to help better meet clients’ needs. These adjustments may include (but are not limited to):
• Adjusting the wait period
• Adjusting the excess
• Adjusting (adding/removing) optional benefits available
• Changing policy ownership
• Adjustments to product type, product structure, sums insured, loadings and/ or exclusions
• Acceptance of special terms and conditions offered by the insurer.
Select four (4) different changes and/or adjustments from the list above and then in the table below:
(i) describe how these can be used to modify Jaco and Annika’s existing insurance arrangements to meet their needs and circumstances, and
(ii) explain why these changes might be appropriate.
An example has been completed for you.
Example: Adjust product terms / structure – recommend an excess on the medical insurance
If Jaco and Annika want to maintain their health insurance cover with Southern Cross or even changing insurers, recommend an excess. This will reduce their premiums which they have indicated are excessive and they have indicated they can use their available investment funds if need be to pay the excess.
1.
2.
3.
4.
Task 2 (31867 2.1)
Read through the given scenarios below. Then, using the information provided about the client’s circumstances:
(i) identify a suitable insurance solution(s), and
(ii) explain the impact on that solution(s) of the alternative source of support listed below.
Note, this impact may be on the decision whether to take such cover and/or on the actual product solution itself.
An example for Scenario 1 has been provided for you however you must also provide an additional solution. (Only one solution needs to be provided for Scenario 1)
Scenario 1:
John is a teacher earning $65,000 a year. He is looking to take out insurance which will protect his income in the event that he is disabled and cannot work. He knows he can get 80% of his income from ACC in weekly compensation if he should be seriously injured. You have explained he has some different options to protect his income or provide extra financial help if sickness should occur. John asks you to explain how any ACC might impact on any personal disability income cover. If relevant, provide some basic calculations to highlight any impact. Assume John’s income is still the same at claim time.
Possible insurance solution Explain the impact(s) of ACC on this solution (if any)
Agreed Value Disability Income Cover
at 62.5 % = $40,625 pa ($3,385 pm) benefit (non-taxable) Any ACC benefit would be directly offset against any Agreed Value benefit. As he is salaried, he would be paid 80% (before tax) = $52,000. This is $43,380 p.a. or $3,615 p.m. after tax. As this is greater than the Agreed Value monthly benefit then none would be payable. Any ACC cover will only pay out in the event of an accident. If he has an illness, then the disability insurance will pay out – providing his claim is accepted.
Scenario 2:
John is also considering taking health insurance and is asking you what health insurance options he has including full comprehensive cover which reimburses GP visits and prescriptions. His wife has a chronic illness and qualifies for a High User Card from the Ministry of Health. John is fit and healthy and rarely visits the GP. Analyse this and other support available from their medical clinic (a Primary Health Organisation) and explain how this might impact his health insurance cover type needs.
Explain the impact of having a High User Card and belonging to a Primary Health Organisation may have on any health insurance solution.
Scenario 3:
John, by nature is a risk taker. He admits he has previously shied away from buying insurance as he has always thought he could manage any risk himself but can now see that this would not always work. He has some alternative support in the form of non-insurance cash assets that he is prepared to use to partly self-insure. He also admitted that, as an only child, he is expecting to gain a large inheritance in the not too distant future. Explain three ways his ability to partly self-insure could impact his insurance solution options.
Non-insurance solutions to self-insure that you could identify
(3 possible solutions are required) Explain the impact the alternative sources of support could have on this insurance option
1.
2.
3.
Scenario 4:
Chantelle is earning $63,000 a year. Her partner, Trish is a stay-at-home mother of two. Fortunately, they had worked hard to lower their mortgage to $996 a month before having the children. Due to their limited budget, they asked if they could protect Chantelle’s income by taking out a Mortgage Repayment type cover for the amount of the mortgage only and then rely on WINZ or ACC benefits if she was unable to work through disability.
Analyse and briefly explain any potential impacts of WINZ and ACC benefits on a solution you suggest
Task 3 (31867 2.2)
For each of the common insurance contract ownership structures provided in the table below, describe:
(i) The consequences (including the responsibilities) for the roles listed
(ii) Other implications (including advantages and disadvantages) of each structure
Structure Role
Policy Owner Premium Payer Life insured Policy Beneficiary
(i) Personal ownership
i.e. Sole ownership by the life insured
Implications and Responsibilities
Implications and Responsibilities
Implications and Responsibilities
Implications and Responsibilities
Implications of the Sole Ownership structure (including any advantages and/or disadvantages)
Structure Role
Policy Owner Premium Payer Life insured Policy Beneficiary
(ii) Joint Ownership (joint tenants)
Implications and Responsibilities
Implications and Responsibilities
Implications and Responsibilities
Implications and Responsibilities
Implications of Joint Ownership (including any advantages and/or disadvantages)
Structure Role
Policy Owner Premium Payer Life insured Policy Beneficiary
(iii) Other party owned
Including:
1. Company owned
2. Trust (trustees) owned
Implications and Responsibilities
Implications and Responsibilities
Implications and Responsibilities
Implications and Responsibilities
Implications of Other Party Ownership (including any advantages and/or disadvantages)
Task 4 (31867 2.3 and 2.4)
When recommending suitable policy ownership to ensure any claim payments meet the identified needs of the client, it is important to consider relevant legislation and estate planning tools.
Part 1: Read carefully through the given scenarios below. Each scenario uses a different ownership structure. Explain the implications of the ownership structure, and the identified estate planning tools or legislation, on any claim payments.
Part 2: When creating and implementing solutions to meet client’s needs, situations can arise where adviser expertise or limits of authority could be exceeded. For each given scenario, explain what you would do and why you need to keep within your limits of authority and/or expertise (i.e. your competence).
Scenario 1:
You are an insurance adviser and your clients, Jane and Aaron have decided to take out a range of insurance covers. These include:
• personal disability income protection
• further life cover and
• critical illness /trauma cover
You have recommended Jane and Aaron jointly own these policies and, in your Fact, Find, you noted that your clients do not have any Enduring Power of Attorney.
Part 1: Explain the implications of Jane and Aaron not having an Enduring Power of Attorney given your recommended covers and ownership structure, and how it may impact on who can receive a claim payment.
Part 2: Consider your limits of authority and expertise as an insurance adviser. Explain what you would do and why, when you identified that no Enduring Power of Attorney was in place.
Scenario 2:
You also note that although Jane and Aaron have been together for 5 years, Jane has never divorced her first husband. An existing life insurance policy is owned by Jane (on her life).
Part 1: Explain any implications of the Property (Relationships) Act 1976 given the ownership of the life policy and the impact it could have on a claim payment
Part 2: Consider your limits of authority and expertise as an insurance adviser. Explain what you would do and why to get the situation sorted out so the insurances were paid in full to the intended person(s).
Scenario 3:
Matt and Lynda have two children (aged 8 and 10) and a home worth $580,000. They own the home as Tenants in Common (Matt 60% and Lynda 40%) to reflect what they brought into the relationship. There is no mortgage. Matt has an older life insurance policy with a sum insured of $342,000 owned solely by himself and is still required to provide on-going family support should he die. He is a self-employed sole trader and often has creditors and quite large tax liabilities. During your engagement as an adviser with them, you discover neither Matt nor Lynda has a Will.
Part 1: Consider the ownership of Matt’s life policy and other assets and explain any implications of each of the two pieces of legislation listed below, and how these may impact on the effectiveness of any claim payments.
The Administration Act 1969
The Income Tax Act 2007
Part 2: Consider your limits of authority and expertise as an insurance adviser. Explain what you would advise Matt and Lynda should do to ensure the insurance solution can better meet their needs
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