Insurance Assignment Report: Analyzing Risks and Insurance Needs

This report, an insurance assignment, delves into the personal and business risks faced by a couple, Jason and Cheryl, and their small construction business. It meticulously assesses health risks associated with Jason's smoking and Cheryl's cycling, along with potential financial burdens from property damage, debt, and business income fluctuations. The report provides detailed advice on debt management, life insurance, general insurance, and taxation, tailored to the couple's specific circumstances. It includes recommendations for insurance policies, outlining features, benefits, and reasons for selection, while also addressing potential risks and advantages. The assignment covers various aspects of financial planning and risk management, providing comprehensive guidance on securing financial independence and protecting against unforeseen events. The report offers insights into the importance of insurance in mitigating financial vulnerabilities, presenting a practical approach to risk assessment and insurance policy selection.

Running head: INSURANCE ASSIGNMENT
Insurance Assignment
Name of the Student
Name of the University
Author Note

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Table of Contents
Part 3................................................................................................................................................2
Answer to Question 1...................................................................................................................2
Answer to Question 5...................................................................................................................4
Answer to Question 6...................................................................................................................7
Part 4................................................................................................................................................8
Answer to Question 4...................................................................................................................8
Bibliography...............................................................................................................................11

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Part 3
Answer to Question 1
The personal risks faced by Jason and Cheryl are as follows:
Health risks: As Jason has been identified to be a heavy smoker, he faces the risk of getting
cancer or other lung related diseases that will affect his well-being. Hence, in order to recover
from the diseases, he has to spend money for getting appropriate treatment. This increases his
exposure to the financial risk of not being able to meet the expenditure of treatment and hence a
health insurance policy should be taken up by Jason to protect himself.
Overseas medical and repatriation expenses: As Cheryl is an avid cyclist and participates in
events that occur on a worldwide basis, there is a chance that she may meet with an accident in
overseas. This will lead to a significant increase in the expenditure incurred by her for her
treatment purposes. The risks faced by Cheryl in this situation are that she may not be able to
afford the expenses to complete her treatment or to return to Australia.
Accidents affecting the ability to work: Any accidents occurring in the workplace of Jason or
Cheryl that results in their disability leads to the couple not being able to work properly and pay
off the loans taken by them. Hence, they face the financial risk of not being able to pay their dues
on the loans due to the absence of their sources of income.
Damage or loss to the personal properties: As the couple have a house worth $450000, car loan
of $20000 and outstanding credit card expenses of $10000, it is of paramount importance that
these products remain insured. In case of any damage that occurs to these properties, the couple
along with their children face the risk of not having a home to live in or not being able to use the
car. Apart from this, they will also have to pay the loans on the above mentioned properties.

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Hence, they face the risk of both financial burden and losing the access to their properties at the
same time.
Risk of Trauma: The uncertain nature of competitive cycling and the health risks faced by Jason
mean that Cheryl may face a trauma in the future that will likely affect her ability to work
effectively in the future. This causes her to face the financial burden that occurs due to a lack of
source of income. To compensate herself for the trauma, it is important for Cheryl to get herself
insured.
Risks faced by small businesses
Income Protection: As a small business involved in the construction industry, it is possible that
Jason may not get sufficient business due to competition from other bigger players in the
industry. This puts him under the risk of losing a part of his income and increases the pressure on
him to perform well as a business.
Litigations and court cases: In case of any negligence in fulfilling the obligations of a particular
contract or a case against the business due to omission and changes in regulations, Jason is put
under the financial risk of making payments to the lawyers. This is a risk faced by most sole
proprietor businesses.
Losses incurred by the business: These risks include theft and loss of properties due to fire and
loss in materials. These make it necessary for the business to purchase new materials or
properties and put them under the financial risk of purchasing additional materials and results in
loss of profits.

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Answer to Question 5
Personal Advice Does the client need
this advice?
Why? Can you give this
advice?
Debt management Yes As the client also
needs to pay for the
general insurance
policy, advice about
the payment of their
personal debts and
restructuring those
debt payments is
necessary to
accommodate the
insurance payments.
No
Life Insurance –
Income protection
and TPD
Yes Due to the health
risks faced by Jason
and the uncertain
nature of cycling
taken up by Cheryl, it
is important that they
opt for an insurance
No

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policy that is best for
the risks faced by
them. Hence, they
need advice about the
type of life insurance
policy and the
duration of the policy
for their situation.
General insurance –
small business
products
Yes Every business needs
protection against the
losses that it may
occur due to
unforeseen events.
Hence, the business
needs to protect itself
against the losses and
requires advice about
the general insurance
schemes available to
it.
Yes
General insurance –
domestic products
Yes This is to protect
against a financial
loss that occurs due
Yes

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to the loss or damage
to a home and to
transfer the risk to
home and building
contents insurance.
Personal sickness and
accident insurance
Yes In case of an inability
of a person to work
due to sickness or a
disability of any
nature, the person
need to protect
themselves against
the loss of income
and financial burdens
caused by it.
Yes
Taxation Yes As insurance
payments are a
safeguard against the
risks of the future, it
is important for the
customers to know
about the deductions
available to them for
No

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taking the insurance
policies and other tax
benefits provided by
the law.
Answer to Question 6
Dear Cheryl and Jason,
As you know, one of the most reliable aspects of life is uncertainty. We cannot always be
sure of the way things are going to turn out. There are situations in which the events may be
favourable to us and there may be situations in which the events may be unfavourable. The
unfavourable nature of events puts you under situations where you face a lot of pressures like
sudden payments of huge sums of money, loss of property and lack of availability of money at a
time when you need it the most. This uncertain nature of events can also be termed as the risk
faced by you. In other words, risk is the exposure to loss, danger or harm that may result in
significant losses incurred by you. Although your life is going pretty well at the moment, there
are certain risks that you are likely to face in the future. They include health risks due to Jason’s
smoking habits, travel risks in the trips taken by Cheryl to foreign countries and losses to
properties due to theft and impairment. For example, as Cheryl is a cyclist and participates in
events that take place on a worldwide basis, she has to travel a lot. While taking part in an event
that occurs on an international scale, god forbid, it may so happen that Cheryl gets injured. The
nature of the injury may be such that it requires urgent and expensive medical care. Due to this
injury, you will have to immediately pay the required amount to the foreign hospital for the
treatment to be continue successfully. However, another risk faced by you in this situation is the

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lack of funds available with you. This lack of money makes the continuing the treatment more
difficult. Even though you may be able to arrange the funds in a short notice, it is not always
possible to obtain readily available funds from the market. It is always better to have a reliable
source of funding that will protect you against any risks and be readily available to you at your
will. This is also known as the insurance against risk. In the present scenario, the absence of an
insurance against the risks is likely to have a negative impact on you.
Part 4
Answer to Question 4
Statement of Advice
In the given situation, both Jason and Cheryl want to keep their family financially
independent under any adverse circumstances and want advice about the personal risks that are
faced by them. The current financial situation of the couple is good in the short run. Jason earns
an annual amount of $90000 from his self-employed construction basis. Cheryl is working as a
personal assistant and earns about $50000. You also have an annual mortgage of $450000 and a
car loan of $20000 and outstanding credit cards of $10000. After meeting all these expenses,
they have a disposable income of $30000 available with them for spending on an annual basis.
They need recommendations that are given by keeping their situation in mind to help them select
an appropriate insurance policy that provides protection against the risks that they are exposed
to. They are also worried about the high costs quoted by the insurance companies and agents.
Hence, another of their needs is to find a policy that does not cost them too much of their income
and comes at a lower cost. The insurance policies also need to be simple so that the couple are
able to effectively understand them.

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Recommendation 1
Features and benefits of the policy
In case of an accident resulting in the death, permanent disability or paraplegia and
quadriplegia, the insurer will receive a benefit of 100% of the value of the policy. In case of
physical severance of one hand or foot, or arm or leg, the benefit available to the policy holder
will be 100%. Loss of up to three fingers will result in the payment of 75% of the policy amount.
Loss of toes pays 50% of the policy amount while 25% of the amount is paid for the loss of
teeth. If the person is not able to work for more than 5 consecutive days due to an illness, then
this policy pays for the loss of income.
Reasons for the recommendations:
As Jason is involved in the construction business and has a chance of meeting with an
accident, this policy covers for such an unforeseen circumstance. The same applies to Cheryl
who may not be able to work for a prolonged period due to an illness and this policy provides
cover for the same.
Risks:
The client is mostly dependent on the income earned by them through their business and
professions. Due to the health risks and risks faced by the business, they should select this policy
which provides them with a stable source of income in case they are not able to maintain a steady
flow of funds.
Advantages and Disadvantages:

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This policy meets the objectives and needs of the clients. It is also ideal for their financial
objectives as it does not cost them too much. However, it mostly covers situations where only
accidents occur and hence will be useful to the clients only when an extraordinary situation
occurs.
Recommendation 2
Features and Benefits: If during the insurance period, your spouse dies as a result of an injury,
we agree to pay: Capital Benefit for death of 20% of the sum insured specified in the capital
benefits section. Note: This amount is limited to a maximum amount of $30000 and there is no
waiting period as the benefits are paid immediately after the incident occurs.
Rehabilitation: In addition to the weekly benefits, we also agree to pay an amount of up to
$10000 for a return to work program approved by us. This consists of retraining for direct
purpose of employment in a new occupation suitable after the incident. There is also no waiting
period here.
Reasons: This is because Cheryl takes part in cycling events and faces the risk of injury/death
due to accident and will be useful for Jason to take this policy.
Risks: In order to reduce the premium costs, you may have to wait for 14 to 28 days. The
additional waiting period will be shown in schedule of insurance.
Advantages and Disadvantages: This is suitable for Jason due to the nature of the risks faced by
Cheryl. However, the premium costs are too high.
Recommendation 3

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Features and benefits: This policy is related to the car insurance policy. It provides compensatory
amount to the policyholders in case of loss incurred due to theft or accident to the car.
Reasons: As the car of the client is already under credit, there needs to be a protection for the
damage sustained to the car to avoid double losses in case of damage to the car.
Risks: The loss to the car causes the client to continue their payments to the bank while also not
being able to use its services for their benefits. Hence, to avoid this financial risk, it is better to
take an insurance policy for the car.
Advantages and Disadvantages: The policy provides protection to the car of the client from a
loss occurring due to an unforeseen event. It is helpful only if there is a loss sustained by the car.
Otherwise, it results in additional costs incurred by the client.
Alternative Strategies:
The other options available to the client are debts, funds available from savings and
retirement schemes and adopting a lifestyle of lower cost. In case of debts, the costs incurred for
the interest payments are much higher than the amount paid as premium. It also does not provide
any protection against the losses. Funds from savings can be better used in other investment
avenues than to protect the current set of assets. Insurance coverage is much more significant
than reducing the quality of lifestyle which is very short term in nature.
Bibliography
Dionne, G., 2013. Risk management: History, definition, and critique. Risk Management and
Insurance Review, 16(2), pp.147-166.
Marois, T., 2015. Banking on Alternatives to Neoliberal Development.