Question 2 (20 marks)

Julia Tang has been a financial planner for ten years. She specializes in insurance planning. Sam Jones, Julias client, has learned some knowledge about insurance from his friends, and he considers that he understands this industry reasonably well. During their meeting, Sam made the following statements. Help Julia to correct her clients misunderstanding.

(a)	An insurance company is just a middleman. It collects premium and pays claims to insurance policyholders. No more and no less.	(5 marks)
(b)	By law, I know that I need to buy auto insurance in Hong Kong. I suppose that I can lie about the conditions of my car and hence, I can pay a smaller premium.	(5 marks)
(c)	I dont understand why people buy whole life insurance. Why not simply buy the same dollar amount of term life insurance and invest the difference in a premium myself? Whole life insurance is not useful.	(5 marks)
(d)	My health insurance has a two-month waiting period. It is just unfair. I dont understand why the insurance company has a waiting period.	(5 marks)