FINANCE FNS50615 Diploma of Financial Planning

Diploma of Financial Planning

Module 4 Assignment

activity 6

part 2 do not know how to wirte rommendations&insurance calculator.

You are to document your "Recommendations" as part of the SOA documentation. This must be uploaded as a separate document into the Monarch Student Management System (LMS). Your recommendations should be written in paragraph form. Use the following headings (below)

Our insurance recommendations

Use the Insurance Calculator provided on the LMS (instructions and details below) to determine the recommended sums required for each client, based on the information provided. You can also make assumptions in regards to the level of income they may require if either were to pass away and the potential earning rate the clients would be comfortable with. Please include these assumptions.

Insurance types explained

In this area you are required to explain each insurance type 'generally'.

That is, explain what each type of insurance provides and some general information about the type of cover. In a SOA this area is general information which is not specific to a client. This information could be used across the board for any client with an insurance recommendation

The basis for our recommendations

Do not assume the sample SOA provided in the Module 1 appendix provides a sufficient 'basis' for the recommendations provided. Use the information in Module 4 course materials to clearly link the key issues and recommendations back to Laura and John's specific scenario as part of your recommendations to demonstrate a sufficient basis.

Note - when using the Insurance Calculator, please note there is not one correct answer.Rather, there are a number of possible correct answers, dependant on assumptions you make in regard to the length of time benefits are to be paid, annual income required or rate of return. Please document all assumptions made. The insurance calculator MUST be uploaded with your assignment.

Insurance Calculator Instructions

This insurance needs analysis calculator considers a client's specific needs, based on their own requirements and goals if they were to pass away, become totally and permanently disabled, suffer a traumatic illness or unable to work due to illness or injury.

The inputs for the calculator can be determined through a client questionnaire and understanding a client's circumstances.

For the calculator, all inputs are indicated by a blue cell.For each type of cover the following needs are covered:

Life Cover

Repayment of 100% of total non-deductible debt

Lump sum to provide replacement income, based on:

oif the client were to pass away how much income would the surviving spouse require to fund living expenses - determined as approximately 60% of current income but can be selected by the client. An amount to cover housekeeping and child care expenses for a stay at home spouse is required.

oDetermine how many years the client would require the income (eg. to age 65, or to life expectancy).

oA reasonable earning rate (less inflation) is applied to determine the lump sum required to fund the replacement income.

An amount to cover final expenses, including funeral. This is usually $20,000, unless specified by the client.

TPD Cover

100% of total non-deductible debt

Lump sum to cover possible Renovation. This is usually $100,000, unless specified by the client.

Lump sum to cover ongoing care expenses, based on:

o25% of current income (remainder of income after Income Protection payment).

oDetermine how many years the client would require the income (eg. to age 65, or to life expectancy).

oA reasonable earning rate (less inflation) is applied to determine the lump sum required to fund the ongoing care expenses.

Trauma

Lump sum to cover Medical Expenses. This is determined to be $150,000, unless specified by the client. Please refer to the 'Event Costs' below.

Lump sum to cover ongoing care expenses - determined as 25% of current income (remainder of income after Income Protection payment) for 2 years. Calculated simply as 25% of income x 2 years.

Income Protection

Monthly benefit determined as 75% of total annual income (plus super), paid monthly.