Insurance Advice Report: University Financial Planning, FPC004

This report provides a detailed analysis of a client's life insurance needs, focusing on a case study of Anna, a 38-year-old commercial artist with a dependent child. The report calculates the required lump-sum amount for life coverage, considering expenses such as mortgage, loans, education, and living costs. It explores appropriate premium strategies, comparing single and regular annuity options, and offers personalized insurance advice, emphasizing the importance of life insurance and retirement benefit planning. The report highlights the significance of assessing income and expenses to stabilize cash flows, recommending both life insurance and retirement planning to manage financial risks. It also includes a table summarizing the lump-sum calculation and references relevant literature on insurance and financial planning.

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

1INSURANCE ADVICE
Table of Contents
Question 1........................................................................................................................................2
References........................................................................................................................................6

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Question 1
a) i) The lump-sum amount that would be required for the purpose of covering all the
expenses and finance requirement would be determined with the help of total cash
inflows and total cash outflows that is expected to be paid out in the due course of time
period. The expenses that would be paid out by Anna would be considered by ignoring
the time value of money consideration where simply expenses or income would be taken
on a simple method for the purpose of determining the total amount of lump sum amount
that would be required for the purpose of life coverage. The expenses that would be
incurred by Anna would be distributed and classified into three key heads such as
mortgages and loans, other expenses that would be including funeral, medical, tax, legal
and emergency funds that would be used for the purpose of determining the total other
expenses. On the other expenses directly related to Jason such as Private School Fees of
Jason for a sum of five years would be around $75,000 taking $15,000 as the full and
final amount that would be required for a sum of five-years for financing the private
secondary school expenses. On the other Jason would also be attending the University for
a sum of three year whereby additional $15,000 would be incurred requiring an all total
of $45,000. On the other hand there would be also annual living costs that would be
required for Jason whereby $26,000 would be required for a sum of ten years making it a
total of $260,000 (Gera et al., 2017). The total cash inflow would be from the current
superannuation balance that is around $100,000 on the other hand, the total cash outflow
would be around $610,000 making a deficit of $510,000 that would be required by Anna
as a purpose of life coverage. The detailed explanation can be well highlighted in the

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given table below where all the income and expenses sources directly related to Jason and
Anna were taken into consideration for the purpose of calculations.
Lump SUM Amount Required
Particulars Amount ($)
Super-Annuation Balance 100,000
Total Cash Inflow 100,000
Mortgage Amount 150,000
Car Loan 10,000
Other Expenses
Funeral Expenses 15,000
Final Medical Expenses 20,000
Tax and Legal Costs 15,000
Emergency Fund 20,000
Expenses Related to Jason
Private School Fees (5 Years) 75,000
University Fees (3 Years) 45,000
Annual Living Costs 260,000
Total Expenses 610,000
Lump-Sum Amount Required $510,000
ii) The premium strategy that would be most appropriate for Anna would be such that it allows
her to cover all the expenses and the premium amount within the annual salary amount that is
around $90,000 that is received by Anna as salary (Zelizer 2017). The insurance premium should
be well adequate such that the total premiums that would be paid by Anna in the due course of
her investment would be sufficient enough to cover the life insurance lump-sum amount. The
different premium options that is available to the company is the single annuity premium where
only a single upfront premium would be paid by Anna. On the other hand, the other option that is
available is the regular annuity option that can be paid by Anna for the purpose of paying off for
the life insurance coverage. The key advantage of the one-time premium amount would be that

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the investors would not have to worry much about the regular insurance payment that would be
paid by the investors (Koijen and Yogo 2016). On the other hand, the key disadvantage for the
single one time insurance payment would be the lump sum insurance premium that would be
paid by the company. In the case of regular insurance payment the key advantage would be the
small amount of insurance premium that would be paid by the Anna acting as an annuity amount
that can be easily paid.
iii) Personal Advice on Insurance can be given to Anna whereby Anna can enter into insurance
contracts that would be helping in covering both life coverage and as well as retirement benefit
planning that could be both done by Anna with the help of insurance contracts. Anna should
consider life insurance policy that would be helping Jason and as well as other expenses that
could be easily meet in order to stabilize the cash flows associated. Since Jason is dependent on
Anna where currently Anna has a list of expenses and mortgage payment that needs to be well
paid out then the same needs to be paid out via the lump sum amount of insurance that would be
stabilizing the overall cash flows (Jensen 2019).
b) In order to well execute the plan it is equally important to consider various sources of
income and the expenses that the company would be incurring in the due course of the
assessed time period. The time period taken into consideration states that Anna is not
having any such material insurance coverage for financing the needs after her death and
that can be well in the form of mortgage payments and expenses that are directly
associated with Anna. Anna should consider both the life insurance coverage and the
retirement benefit planning with the help of insurance so that she can get ample amount
of risk coverage in terms of monetary requirement by investing into right time and a right
place (Gundrum Insurance / Investments, LLC 2019).

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The lump-sum amount that would be required for the purpose of covering all the
expenses and finance requirement will be $560,000 and that would be determined with
the help of total cash inflows and total cash outflows that is expected to be paid out in the
due course of time period. The expenses that would be paid out by Anna would be
considered by ignoring the time value of money consideration where simply expenses or
income would be taken on a simple method for the purpose of determining the total
amount of lump sum amount that would be required for the purpose of life coverage.

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References
Gera, R., Mittal, S., Batra, D.K. and Prasad, B., 2017. Evaluating the effects of service quality,
customer satisfaction, and service value on behavioral intentions with life insurance customers in
India. International Journal of Service Science, Management, Engineering, and Technology
(IJSSMET), 8(3), pp.1-20.
Gundrum Insurance / Investments, LLC. (2019). Insurance Strategies. [online] Available at:
http://www.gundrumii.com/insurance-strategies.html [Accessed 21 Aug. 2019].
Jensen, N.R., 2019. Life insurance decisions under recursive utility. Scandinavian Actuarial
Journal, 2019(3), pp.204-227.
Koijen, R.S. and Yogo, M., 2016. Shadow insurance. Econometrica, 84(3), pp.1265-1287.
Zelizer, V.A.R., 2017. Morals and markets: The development of life insurance in the United
States. Columbia University Press.