Monarch Institute DFP Module 4: Insurance Fundamentals Assessment

This assignment, completed by a student, covers the core concepts of insurance within the context of a Diploma of Financial Planning (DFP) Module 4 course. The assessment includes three activities: short answer questions on general and personal insurance, a case study involving risk assessment and insurance policy considerations for an airplane owner, and a simulation exercise focusing on trauma and total and permanent disability (TPD) insurance. The assignment delves into various insurance policies, claim scenarios, and the roles of actuaries and underwriters. It also explores risk management, insurance calculations, and the implications of under-insuring assets. The student's responses demonstrate an understanding of insurance types, policy features, and the application of insurance principles to real-world scenarios, showcasing their ability to analyze and evaluate insurance needs within different contexts. The assignment adheres to the Monarch Institute's assessment guidelines, emphasizing the application of knowledge and skills relevant to financial planning.

DFP Module 4 Assignment 1505
Diploma of Financial Planning
Module 4 Assignment
Submission Instructions:
Key steps that must be followed:
1. Please complete the Declaration of Authenticity at the bottom of this page.
2. Once you have completed all parts of the assessment and saved it (eg. to your
desktop computer), login to the Monarch Learning Management System (LMS)
to submit your assessment.
3. In the LMS, click on the file ”Submit DFP Module 4 Assignment” in the Module
4 section of your course and upload your assessment file/s by following the
prompts.
4. Please be sure to click “Continue” after clicking “submit”.This ensures your
assessor receives notification – very important!
Declaration of Understanding and Authenticity *
I have read and understood the assessment instructions provided to me in the Learning Management System.
I certify that the attached material is my original work. No other person’s work hasbeen used without due
acknowledgement. I understandthat the work submitted may be reproduced and/or communicated for the
purpose
of detecting plagiarism.
Student Name*: Date:
* I understand that by typing my name or inserting a digital signature into this box that I agree and am bound by
the above student declaration.

DFP Module 4 Assignment 1601
Units: FNSASICX503, FNSASICZ503, FNSASICM503, FNSFPL504
Important assessment information
Aims of this assessment
This assessment covers the fundamentals of insurance. General insurance concepts are
addressed, including the role of actuaries and underwriters. Personal insurance contracts are
explored including Term Life policies, Total and Permanent Disablement (TPD) policies,
Critical Illness (Trauma) policies and Income Protection insurance policies. The requirements
for insurance to be offered via a Product Disclosure Statement (PDS) is covered with specific
emphasis on researching specific definitions that dictate what is included, and what is not
included within a standard contract. Insurance “buy-back” features within Term Life and
Trauma insurance policies are a focus. The tax benefits and implications associated with
income protection policy premiums and benefits are also addressed. Statement of Advice
(SOA) documents focussing on insurance advice are critiqued, with a focus on determining
whether a reasonable basis for advice has been met. Lump sum calculation for Term Life and
TPD insurance needs are calculated using the ‘Income Capitalisation’, ‘Age-to-retirement’,
and ‘goals’ approaches. Risk and best practice involving replacing insurance policies is
explored, as is the formal insurance review process.
Marking and feedback
This assignment contains 7 assessment activities each containing specific instructions.
This particular assessment forms part of your overall assessment for the following units of
competency:
 FNSASICX503
 FNSASICZ503
 FNSASICM503
 FNSFPL504
Grading for this assessment will be deemed “competent” or “not-yet-competent” in line with
specified educational standards under the Australian Qualifications Framework.
What does “competent” mean?
These answers contain relevant and accurate information in response to the question/s with
limited serious errors in fact or application. If incorrect information is contained in an answer,
it must be fundamentally outweighed by the accurate information provided. This will be
assessed against a marking guide provided to assessors for their determination.
What does “not-yet-competent” mean?
This occurs when an assessment does not meet the marking guide standards provided to
assessors. These answers either do not address the question specifically, or are wrong from a

DFP Module 4 Assignment 1601
Units: FNSASICX503, FNSASICZ503, FNSASICM503, FNSFPL504
legislative perspective, or are incorrectly applied. Answers that omit to provide a response to
any significant issue (where multiple issues must be addressed in a question) may also be
deemed not-yet-competent. Answers that have faulty reasoning, a poor standard of
expression or include plagiarism may also be deemed not-yet-competent. Please note,
additional information regarding Monarch’s plagiarism policy is contained in the Student
Information Guide which can be found here: http://www.monarch.edu.au/student-info/
What happens if you are deemed not-yet-competent?
In the event you do not achieve competency by your assessor on this assessment, you will be
given one more opportunity to re-submit the assessment after consultation with your
Trainer/ Assessor. You will know your assessment is deemed ‘not-yet-competent’ if your
grade book in the Monarch LMS says “NYC” after you have received an email from your
assessor advising your assessment has been graded.
Important: It is your responsibility to ensure your assessment resubmission addresses all
areas deemed unsatisfactory by your assessor. Please note, if you are still unsuccessful in
meeting competency after resubmitting your assessment, you will be required to repeat
those units.
In the event that you have concerns about the assessment decision then you can refer to our
Complaints & Appeals process also contained within the Student Information Guide.
Expectations from your assessor when answering different types of assessment questions
Knowledge based questions:
A knowledge based question requires you to clearly identify and cover the key subject matter
areas raised in the question in full as part of the response.
Skill based questions:
Where you are asked to write as though you are speaking to a client, your answers must
show your ability to:
 understand your client’s concerns/perspective/views
 show empathy
 display a professional response
 explain ideas clearly and simply so your client can understand the issues
Good luck
Finally, good luck with your learning and assessments and remember your trainers are here
to assist you 

DFP Module 4 Assignment 1601
Units: FNSASICX503, FNSASICZ503, FNSASICM503, FNSFPL504
Assessment Activity 1
Short Answer
General Insurance & Personal Insurance
Activity instructions to candidates
 This is an open book assessment activity.
 You are required to read this assessment and answer all 8 questions that follow.
 Please type your answers in the spaces provided.
 Please ensure you have read “Important assessment information” at the front of this assessment
 Estimated time for completion of this assessment activity: 1 hour

DFP Module 4 Assignment 1601
Units: FNSASICX503, FNSASICZ503, FNSASICM503, FNSFPL504
Required
For each of the following situations, describe the insurance policy(s) you believe would entitle a claim to
be made. In doing so, please explain why you think a claim could be made.
a) Nina runs a coffee shop and slips on a step at home one day and suffers a back injury. As a result
she is unable to work for 3 months and incurs significant medical costs.
In this scenario, Nina is eligible for certain insurances as she is a working lady and therefore the
insurance policies that are suitable for the lady are Private Health Insurance, Income Protection
Insurance and Trauma Insurance. Claim would be made as Nina incurs a significant amount of
medical cost.
b) Steven, an employee, suffers from stress and is required to rest at home for 2 weeks.
In this scenario, Steve may not require any insurance policies as the person can rely on sick leave and
leave of absence.
c) Alfred is knocked down by a fork lift at work and is hospitalised for 3 weeks.
With respect to Alfred, he may not require any insurance policies as he may make use of his sick
leaves and the leave of absences and he would be even covered up by the worker’s compensation
insurance. The availability of this insurance permits him not to take any further insurance policies.
d) Linda, an employee is diagnosed with cancer incurs a significant amount of medical costs.
With respect to Linda, she can apply for certain insurance policies like the trauma insurance, life
insurance and income protection insurance. Claims can be made by Linda as she is suffering from
cancer and has a significant amount of medical costs that she has to bear.
e) She dies within 6 months of the diagnoses.
As she dies within the six months of the diagnosis, her family would receive the compensation
amount from the life insurance policy and would receive a large amount as her income protection
policy.

DFP Module 4 Assignment 1601
Units: FNSASICX503, FNSASICZ503, FNSASICM503, FNSFPL504
f) Peter was a self-employed plumber. Due to an accident at a construction site one day, he suffers
an accident and is unable to work again as a plumber or tradesperson generally.
In this case study as Peter will not be able to work again as a plumber and even as a tradesperson, the
insurance policies that he requires are the income protection insurance and the total and permanent
disability insurance. He can make claims from these policies as his permanent income has ceased due
to the accident and will not be able to work anymore. This suggests that there has to be a total and
permanent disability and so can claim for the same as well.
g) A restaurant that is shut down for 6 months because of a cyclone.
In this case study as the restaurant is shut down for six months for a cyclone the owner may
purchase insurance policies like the income protection insurance and Business Interruption
Insurance. The restaurant would get claims from the Business Interruption Insurance as it is seen
that the cyclone has not been named by the national bodies.
h) A tenant whose flat burns down.
In case of a tenant whose flat has been burnt down, the tenant can purchase a life insurance policy
and a general insurance because with the help of the general insurance, the tenant can financially
compensate with the household items that has been lost.

DFP Module 4 Assignment 1601
Units: FNSASICX503, FNSASICZ503, FNSASICM503, FNSFPL504
Assessment Activity 2
Case Study
General Insurance
Activity instructions to candidates
 This is an open book assessment activity.
 You are required to read this assessment and answer all 3 questions that follow.
 Please type your answers in the spaces provided.
 Please ensure you have read “Important assessment information” at the front of this assessment
 Estimated time for completion of this assessment activity: 30 minutes

DFP Module 4 Assignment 1601
Units: FNSASICX503, FNSASICZ503, FNSASICM503, FNSFPL504
Background
Albert recently acquired a new plane. He plans to use it mainly for personal purposes, but will also use it
for charter trips in order to raise money to help him make payments on the loan and for maintenance
costs.
Required:
1. Advise Albert on the risks he faces in owning the plane, whether the risks are speculative or pure,
and how best he might handle each of those risks.
The owning of the plane for business and personal use would expose Albert to pure risks as the end
result for the exposure can be either profit or loss. The pure risks that is faced by Albert are:
 Injury or death of himself, which is known as the personal risk
 Injury or death to the passengers denoted as the public liability
 Loss or damage of the plane even known as property risk
 Loss of income from the charter business due to property and personal risk, which can even
be denoted as the commercial or consequential risk.
The best way Albert can handle himself would be undertaking various insurance policies that have
been listed below:
 Purchasing insurance policies like the life insurance, trauma insurance and the income
protection insurance.
 Albert can even purchase property insurance and avoid himself from the charter business.
 A public liability insurance can even be used or Albert can avoid the charter business
2. To save some money, Albert decides to insure the plane for less than what it is worth. How is an
insurance company likely to deal with this position in the event of a claim?
In order to deal with this condition, the insurance company requires to make use of the formula:
(Amount of insurance carried/amount of insurance required)* Amount of loss.
This is known as Coinsurance. The Coinsurance amount that is insured can be lower than the full value
due to any market fluctuations but has to be more than the amount that is specified or else
coinsurance would apply.

DFP Module 4 Assignment 1601
Units: FNSASICX503, FNSASICZ503, FNSASICM503, FNSFPL504
3. Explain the difference between an actuary and an underwriter.
Underwriter is known as the individual within the firm who will be helpful in assessing if the firm
should undertaken the risk based on the personal details of the person or the company who has
applied for the insurance.
Actuary on the other hand is accountable for providing the general benchmark price to the overall
insurance plan and disclosing what the price of an insurance product should be.
In an insurance company, the actuaries are extrinsic and provide a guideline to the price of an
insurance product and then the underwriters of the form are free to look at the things at a case by
case basis and examine if all the people who have applied for the insurance should be given the same
amount of insurance or not.
Assessment Activity 3
Simulation Exercise
Insurance – Trauma, TPD
Activity instructions to candidates
 This is an open book assessment activity.
 You are required to read this assessment and answer all 10 questions that follow.
 Please type your answers in the spaces provided.
 Please ensure you have read “Important assessment information” at the front of this assessment
 Estimated time for completion of this assessment activity: 2 hours

DFP Module 4 Assignment 1601
Units: FNSASICX503, FNSASICZ503, FNSASICM503, FNSFPL504
Background
Craig and Beverley come to see you for the first appointment meeting. Craig is 41 and Beverley is 39.
They are married with three children aged 9, 8 and 5. Whilst Craig is the main breadwinner, Beverley
has just returned to work part-time. As part of your first interview, you are trying to determine your
clients’ insurance needs.
Required:
Your task – Skills and Knowledge:
1. How could you respond to Craig who says “Beverley does not need any life insurance because I
already have life insurance and income protection insurance.”?
This question can be answered in an effective manner as it is seen that the couple are different as an
individual and have their own life and health. Beverly is even working as a part-time currently and therefore
has to be go out for work. This leads to a risk in her life as well. Therefore, it is essential to purchase a life
insurance and an income protection policy for Beverly as well because in case of death Beverly, Craig can
receive a financial compensation as well and if Beverly loses her job, the income protection insurance
would provide financial assistance as well.
2. List 4 reasons why your clients might be reluctant to take on more life insurance?
The four factors why the clients are reluctant to purchase another life insurance are given below:
1. The price of a life insurance product is very high and therefore, the client is satisfied with one
life insurance only.
2. The other factor that has been discovered that Craig (41) and Beverly (39) are quite young
and are even healthy and therefore feel that life insurance policies would be a poor
investment for them. They are planning to purchase once they are growing old.
3. The case study has provided that the client has three children who are very young and
therefore the client needs to accumulate money on order to meet the future expenses of
their children regarding their studies and other expenses. The expenses would increase with
the advent of time and therefore the client is not in the intention of purchasing another life
insurance product and locking a significant amount of money on it.
4. The clients feel unpleasant when they hear about death and therefore they are not in the
opinion to purchase the anymore life insurance product.

DFP Module 4 Assignment 1601
Units: FNSASICX503, FNSASICZ503, FNSASICM503, FNSFPL504
3. Explain to Craig and Beverley some of the characteristics of trauma insurance.
Trauma Insurance is even known as recovery insurance and critical illness insurance and is helpful
in lower the pressure off so that an individual can spend their time in concentrating on their health
recovery and not thinking about their finance. This insurance plan has been found to be an
appropriate financial back up plan for their lifestyle and provides them the confidence to go ahead
with their plan and have a secured future life. Trauma Insurance is even helpful for any individual
for recovering from their illness and even maintains their financial position. The various
characteristics of this insurance are as follows:
 This insurance pays for the cost of the treatment and the care of the individuals and
secures them from paying for any health cost from their own pocket.
 Pays for the recuperation aids
 Replace any lost income due to a lowering capability to earn
 Funds for a change in the lifestyle.
It has been observed that recovering physically is possible from a critical illness but the impact financially
remains for a long time. With the help of the trauma insurance one can access the best medical treatment
without worrying a lot about the cost of the treatment as the amount is paid by the insurance. Therefore,
trauma insurance is important if one wants to recover from their illness.
.
4. What definition/s would Craig need to satisfy to receive a TPD payout whilst working as an
electrician under the ‘any occupation’ definition? Refer to page 104-106 in the Comminsure PDS
included in Appendix 1 of Module 4.
The definitions Craig would require to satisfy to receive a TPD as he works as an electrician are as
follows:
Being an electrician, Craig needs to have accidental death cover and death cover benefit so that The
amount of the cover is that shown in the policy schedule as increased or decreased under the policy.
This amount is the Accidental Death Cover that is paid.
The other definition that is required is the child cover benefit in which his children would be covered
as well and would be provided financial assistance in case of any mishaps or accidents. The cover
would end when the children reach at the age of 18 years.
Craig can even be provided a flexi-linked policy life insured where he life insured to whom primary
Life Care applies under the primary policy and flexi-linked rider cover applies

DFP Module 4 Assignment 1601
Units: FNSASICX503, FNSASICZ503, FNSASICM503, FNSFPL504
under the flexi-linked policy. The Life Care for this life insured is shown as ‘flexi-linked’ in the policy
schedule.
For flexi-linking to apply, the primary Life Care and flexi-linked rider cover must apply to the same
life insured.
Flexi-linked TPD cover can even be explained where the TPD Cover applying to the flexi-linked life
insured under the flexi-linked policy, being cover to which flexi-linking applies. Flexi-linked TPD Cover
includes a benefit payable for partial and permanent disability, the TPD Cover
Severe Hardship Booster benefit and the TPD Cover Loyalty Bonus benefit under the flexi-linked
policy. Craig can even name a nominee where after his death the nominee can claim for the
compensation amount from the firm and thereby maintaining the financial position of the family.
5. As a consequence of your interview, Craig and Beverley are considering taking out some
insurance for Beverley. Prepare a question you could ask them to determine whether they are
ready to proceed to the next step in the process of acquiring some/more life insurance. For
example, “…can you see why that could be an issue for you?”
The question that is asked to the client is as follows:
Have you understood the qualities of an insurance product and have you understood that being an
electrician there are various risks and so are you ready to purchase an insurance product?
6. How would you explain to any client why only having term life insurance may be insufficient?
Maintaining term life insurance may be insufficient as it is seen that term life insurance only looks after the
financial compensation that may occur due to the death. But, as Craig is an electrician he may face risks
that may lead to total and permanent disablement and thereby may lose the ability to earn income.
Therefore, it is essential so maintain income protection insurance as well as trauma or total and permanent
disablement insurance so that in case of such risks the client recover from such situations and can maintain
their current lifestyle.
7. How often do you think it would be appropriate to review Craig and Beverley’s personal
insurance? Explain why.