Jarrod, age 42, is an analyst at XYZ bank and married with two children aged 9 and 7. Jarrod is paid a salary of $145,000pa (net $103,000pa). His wife Deilah, age 45, works full time on her online store that sells childrens shoes generating a taxable income for herself of $85,000pa (net $66,000pa).

Both are non-smokers and are fairly healthy and active. Jarrod enjoys paragliding once a month whilst Deliah prefers to spend her free time on the ground hiking with the kids! Jarrods parents are both in their late 70s and are active and healthy. Deliahs parents have both passed on when they were relatively young; her mother died of breast cancer at age 55 and her father had a brain haemorrhage at age 62.

Jarrod and Deliah just moved to a bigger, and recently built, home which is valued at $1.4 million (land value included of $450,000) in a gated community. Their mortgage is $670,000 and their minimum repayments are $4,000 per month ($48,000pa), but they are depositing an extra $2000 per month into their offset account and with a goal of clearing the loan in 12 years rather than 20 years. Their living expenses are $70,000 per annum and that includes family holidays. They are saving a further $2000 per month into a high interest savings account to cover private school fees for the childrens secondary education, expected to cost $10,000 pa per child.

Jarrod has a superannuation balance of $245,000 with life and total and permanent disability insurance cover within superannuation of $125,000. Deliah has a superannuation balance of $210,000 with life and total and permanent disability insurance cover within superannuation of $95,000. They make some personal deductible contributions to superannuation every year to help build their savings for retirement.

Question 1

1. Explain five (5) factors in Jarrods and Deliahs circumstances that an underwriter would consider for their general insurance cover
2. Explain five (5) factors in Jarrods and Deliahs circumstances that an underwriter would consider for their life insurance cover
3. What is the impact of underwriting to their premiums?

Question 2

Deliah operates her online shop from home. The study is her home office and has a computer, furniture, shelving and cabinets. A friend visits to pick up their order and falls over the back steps and hurts their shoulder. A week later Deliah hears from her friend who explains she needs treatment and wants Deliah to cover her out of pocket expenses.

1. Explain if their householders policy will cover Deliah's business property and activities.
2. Will householders policy pay for this cost, ie injuries to friend?
3. What is the difference for gap cover purposes between the Medical Benefits Schedule (PBS) and a private schedule of benefits?

Question 3

Jarod notices some water damage in the corner of the kitchen. You explain to Jarod and Delia that they must notify their insurer immediately in the event of their intention to make a claim.

1. Discuss the reasons why an insurer requires early notification of possible claims and any legislative provisions that may impact on the insurers ability to decline a claim for late notification.
2. Explain how insurers measure their loss. Include a discussion of market value and reinstatement in your answer.
3. What is insurable interest? Explain how the Insurance Contracts Act 1984 (Cth) modifies the common law principle of insurable interest and give one example.

Question 4

Jarrod and Deliah's home was broken into. Laptops, TVs, electronic tablets, cash and jewellery were taken. Jarrod always wanted a TV in the bedroom and has the necessary cabling. He claims for an extra TV.

1. Insurance fraud if a major problem for insurers in Australia. Discuss the common type of fraudulent claims, the common law remedies available to insurers and any legislative restrictions on their remedies.
2. Explain the purpose of policy conditions and provide an example.
3. Give two specific reasons for reinsurance. Distinguish between facultative and treaty reinsurance.