Monarch Institute DFP Module 4 Insurance Cover Recommendation Report

This report assesses the insurance needs of a married couple, Laura and John, focusing on life, TPD, trauma, and income protection cover. The assessment considers their ages, employment stability, and the impending addition of a child. The report includes detailed calculations in an Excel sheet, adjusting for existing insurance policies and factoring in inflation and salary growth rates. Recommendations are provided based on standard formulas and methodologies, considering various insurance types and their benefits. The report explains the different types of insurance, including life cover, TPD cover, trauma cover, and income protection, and provides a rationale for the insurance recommendations, emphasizing the importance of coverage in the face of uncertainty. The report also includes references to sources like Trading Economics and ClearTax for the assumptions used in the calculations and the explanation of insurance types.

Diploma of Financial Planning
Assessment 1
The assessment deals with computing the amount of life insurance cover required to be taken by
married couple Laura and John aged 33 and 36 years respectively. Further, in the details provided it
has been given to understand that the job of Laura is stable as a chemical engineer while the job of
John is quite unstable as freelancer journalist. The part 1 of the report deals with computation of
additional amount of insurance cover to be taken by the couple who is soon going to have child. The
computation has been made in excel based on the details provided. The computation has been
enclosed in the excel. Further, since both Laura and John has initially taken some amount of
insurance, the said amount shall be adjusted to derive the final value of insurance cover required.
Sl.
No Particular Laura John
1 Life Cover $ 11,26,637 $ 13,76,018
2 TPD Cover $ 7,50,500 $ 7,26,313
3 Trauma Cover $ 1,92,500 $ 1,82,500
4 Income Protection Cover $ 5,817 $ $4,448
The assumptions involved in the said computation encompasses the following:-
(a) The rate of inflation has been assumed at 1.8%; ( TRADING ECONOMICS, 2019)
(b) The rate of growth of salary of Laura has been taken at 8% on account of stability in work profile
and higher growth perspective;
(c) The rate of growth of salary of John has been taken at 2.5% on account of instability in work
profile;
Assessment 2
Our Insurance Recommendation
Based on computation detailed in Excel, the amount of insurance cover required to be taken has been
detailed here-in-below:
Sl.
No Particular Laura John
1 Life Cover $ 11,26,637 $ 13,76,018
2 TPD Cover $ 7,50,500 $ 7,26,313
3 Trauma Cover $ 1,92,500 $ 1,82,500
4 Income Protection Cover $ 5,817 $ $4,448
Further, the above recommendation is net of the initial Life and TDP cover taken by John and Laura.
Also, the said insurance has been adjusted against life cover. The assumption taken for the said
recommendation has been detailed here-in-under:
(a) The rate of inflation has been assumed at 1.8%; ( TRADING ECONOMICS, 2019)
(b) The rate of growth of salary of Laura has been taken at 8% on account of stability in work profile
and higher growth perspective;
(c) The rate of growth of salary of John has been taken at 2.5% on account of instability in work
profile;

Insurance Types Explained
There are generally two types of insurance, one is life insurance which insurance cover to a person
against death, terminal illness, disability of total and permanent nature and critical illness. (Defmacro
Software Pvt. Ltd., 2019) The second insurance cover includes protection of income which protects a
company against any loss of income or operating expenses of fixed nature in case of disability.
The present case deals with both class of insurance cover wherein the computation of life cover,
TPD, Trauma and income protection cover has been done.
Life cover: These life cover pays a lump sum amount to an individual on death or on terminal
illness. These insurance also covers an individual funeral expense.
TDP Cover: Under this cover, a lump sum amount is paid in case of any permanent disablement of an
individual.
Trauma Cover: These insurance covers an individual against any specific trauma or disease.
Income Protection: Under this type of insurance, approximately 75% of the income of an individual
is paid in case of any injury or illness on account of which an individual is unable to go to his
occupation or earn income.
Basis of Recommendation
It shall be wise decision on the part of the couple to take the aforesaid insurance on account of
uncertainty and unforeseen circumstances. Further, the computation of the said insurance amount has
been based on standard formulas and methodology devised and tested to perfection based on past
data. Also, the said computation is perfect and rational on the basis of data provided and shall insure
them against any contingent event in future.

References
TRADING ECONOMICS. (2019). Australia Inflation Rate. Retrieved April 4, 2019, from
tradingeconomics.com: https://tradingeconomics.com/australia/inflation-cpi
Defmacro Software Pvt. Ltd. (2019). Life Insurance – Benefits & Types. Retrieved April 4, 2019, from
cleartax.in: https://cleartax.in/s/life-insurance