DFP2_AS_v4 Case Study: Evaluating Insurance and Risk Protection Plan

This case study presents a financial planning consultation between a financial advisor and the Smyths, a couple seeking advice on insurance and risk protection. The consultation addresses concerns about the cost of trauma policies, mortgage payments during illness, superannuation options for trauma insurance, and the rationale behind personal income protection policies. The advisor clarifies the benefits of maintaining a separate income protection policy from superannuation, suggests strategies for reducing policy costs through tax deductions and adjusted waiting periods, and justifies the need for higher life and TPD coverage for John based on age and income contribution. The discussion further explores the advantages of retaining the existing super fund and its associated benefits. The consultation concludes with the Smyths expressing satisfaction with the explanations and a commitment to future collaboration.

Running head: INSURANCE
Insurance
Name of the Student:
Name of the University:
Author’s Note:

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Section 1
Me: hello Mr. and Mrs. Smyth. It has been a while that we last met. Thank you for scheduling
this meeting. It has been a long time that we had a meeting and it is nice to see you again.
John: Yes it has been long and I am happy that we met as we have loads to discuss.
Me: I feel you have various queries with respect to the financial planning consultation that has
been provided to you.
John: Both of us have been having specific problems regarding the advices that have been given
and therefore wanted to meet you in person.
You: I am quite conscious and hence have been looking forward to this meeting. I have
knowledge that you have a travelling job and so have a schedule that is very tiresome and hectic.
John: Yes, I don’t usually get tired as I can mix with people well and have friends to hang out
with.
You: I am quite sure that you have knowledge about cost benefit trade-offs and so you know
about the uncertainties of the market
John: Yes that I do to some extent.
You: It is then better to move into the issues and start our conversation regarding the problems
that you both have and come to conclusion with the help of which these issues can be controlled
and managed. I would like to inform you that after the discussion I would be able to satisfy you
with the advices that are essential with the help of which these problems can be managed. I
would ensure that the policies and plans are prepared in a process so that the future plans are

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attained. We shall even have a conversation regarding the future income of your wife and her
business plans as well so that a comfortable and better future life can be attained.
Section 2
You: the first issue that you are facing has been the cost related to the trauma policies and you
feel that the policy amount is very high. You even have the query with respect to the fact
whether you can pay the mortgage at the time of short-term traumatic illness or accident. I would
like to inform you that the cost for the trauma product is high so that it can pay out the assets for
both of you. You need to pay off the mortgage at the time of short-term traumatic illness or
accidents as if the mortgages are not paid the amount will rise and penalties will be applicable as
well. Therefore, the value will rise and has to be paid off. Paying the mortgage at this scenario
will the burden of additional payment and the amount can be paid back before the time of
retirement.
John: I feel that you are right but I need to go through certain aspects with the help of which I
can confirm and feel satisfied. I am concerned about the future life of my child and want
sufficient money with the help of which I can provide him with proper education and
comfortable lifestyle.
John: I have another query which is related to the fact whether there are any super funds that
would offer us with trauma insurance.
You: Earlier there were super funds that gave trauma insurance and this helped the clients to
attain benefits from the super. Traditionally, paying premiums by super is attractive as the
premium does not come from disposable income and it does not have an effect on the income tax

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that is earned. But after 2014, when the new legislation was passed, trauma coverage is not
added within the super fund. Therefore, there are no such options left at present.
John: Ok, I had heard the same but wanted to confirm. It would have been better if this would
have been there. However, we have to plan out a way with the help of which benefits can be
ascertained.
John: I had a query with respect to the fact whether why you recommended a personal income
protection policy for me when I had the super fund to cover it out.
You: I have recommended a personal income protection policy because of several factors. The
policy fees are paid with the help of super funds but the balance of the super will be lower. There
are chances that there can be less coverage and it will be cheaper as well. The maintenance of
income protection will reduce the actual balance of the super and hence an income protection
policy from outside is suggested so that the super balance can be maintained and the income will
be protected.
John: Ok, this is nice. I did not have so much idea and therefore had to ask. I think this is a good
plan from your end.
John: I want to know whether there are any process of reducing the cost of the income protection
policies whilst retaining the same benefit.
You: There are ways with the assistance of which expenses of income protection plan can be
decreased and similar benefits can be ascertained. You can ask for a tax deduction for the
premium for the income protection plan and this one of the processes with the help of which the
tax value can be decreased and in this manner the cost can be reduced in a drastic manner. The
extent of the waiting period will be supportive in mitigating the premium by a percentage of

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40%. The waiting period that is suggested is for 14 to 30 days and this would reduce the
premium for income protection plan. Seeking for income protection policies with the existing
policy without any extra expenses can be helpful in reducing the expenses and maintaining
similar benefits.
John: I think whatever you have said, is quite correct and now as you have mentioned what we
are looking for I feel very satisfied.
John: I even want to know why I require more life and TPD coverage than my wife.
You: This is an interesting question and I need to explain to you properly so that you can have an
effective idea regarding the same. You require more TPD and life coverage as you are older than
your wife and the probability of you falling sick is more than your wife. You would be retiring
early and therefore this has been the factors due to which you require these things that I have
recommended. You are even earning more than your wife and therefore your contribution s more
in the family. So in case of any kind of unprecedented events your family and you would be
financially remunerated. In this manner your future life will be safe and secured.
John: I am happy with the explanation that you have given but in this case I need to rethink and
plan in a better way so that the net income for me in the future can be increased as well.
John: One last question, I just want to know why I should switch to the same super fund as me
and take out $2m life/TPD cover.
You: I feel you cannot switch to the same super fund and withdraw $2 million life/TPD cover as
there are various benefits that you are receiving from the existing cover. I have seen that the
premium which you pay for the current cover is lower than what your wife has to pay. Even
though the coverage for you is $750,000, you have the benefit of taking a personal policy of $2

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million from this coverage and hence this gives an extra benefit for you. Therefore, you or your
nominee have the option of claiming $2 million for the personal policy as well as the insured
amount of $750,000 when you require. This explains indicates that the real amount that can be
claimed will be higher as well. The other benefit from this cover has been that the additional
personal policy amount can be claimed from your end during any point of time during the course
of life and hence this money can be used by you in order to enhance the standard of living of
your family and meet any additional expenses.
John: I am quite happy with your explanations and your explaining capability. It was a success to
have a meeting with you.

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Section 3
You: I have explained all your queries with respect to your plans and goals. Are there any other
issues with respect to which you are looking for an advice?
John: I have heard what you have said and I am quite happy with it. I cannot recollect any other
issues on which I seek advice at this point of time. However, after reviewing what you have said
at a later stage if I find any issues I would surely get back to you for help. I am satisfied with
what you have explained and I am looking forward to meet you in case I have any other queries.
You: It would be my honor to help you out.

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Section 4
You: I am honored that you have given me the time and the chance to express my experience that
can be of any assistance to you for your future endeavors.
John: I am feeling obliged that I received your guidance.
You: I hope I have been able to cover all your questions.
John: Yes. I will take your assistance if I need any in the future as well.
You: Sure. We shall have a meeting annually so that I can suggest and answer your problems. I
can even recommend with new and better products and policies. You can even contact me over
phone as I am always available for your help.