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29 Cards in this Set
- Front
- Back
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What is the risk management process? |
1. Determine objectives of client (outcomes of risk management plan) 2. ID risk - use systematic approach so don't overlook e.g. policy checklists, risk analysis questionaires 3. Quantification of risk - rank risk and measure size and probability 4. Strategies for handling risk => Risk control: Minimise risk ==> Avoidance: Don't engage e.g. bungee jump ===>reduction: Reduc risk e.g. fire sprinkler Risk financing: Arranging availability of funds to meet losses ==> Retention: conscious, unconscious, volutnary or involuntary ==> Transfer: insurance 5. Implement 6. Review |
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What are factors that contribute to under-insurance? |
1. Accumulation of possession 2. Upgrading and improving assets 3. Financial constraints 4. Increasing building costs - site clearing, removal of debris, alternative accommodation |
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What is life insurance? |
Premature death and disability Consider: 1. What is needed to take care of immediate expenses including outstanding debts e.g. funeral, medcial, mortgages, other debts, emergency funds, taxes 2. Who would be affected? 3. What extent? The degree of dependability => Young adult - limited needs on death + long future if permanently disabled => Young family - death of income earner/homemaker or permanent disablement => mature family - children self-supporting, health, disability consideration + existing assets 4. What insurance cover need? |
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How do you calculate needs? |
1. Multiple approach: Sum needed to replace an earned income with investment income (a) Decide on salary to be replaced (b) Nominate an achievable investment interest rate (c)Divide by 100 and round up (d) Multiply by salary to be replaced by the multiple 2. Needs approach 1. Calculate amount needed for dependents to maintain standard of living => Partner => lifetime/superannuation => Children = > dependency Look at living expenses incurred currently 2. Calculate resources dependents have to meet those needs => Income from surviving members => Government benefits => Super => Life insurance => Investment that can be converted into income producing asset 3. Life insurance needed for difference |
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What is the disadvantages of the multiple appraoch? |
1. Doesn't consider existing resource 2. Doesn't consider resources needed by dependents 3. Not provide inflation protection if use nominal investment returns |
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What is the disadvantage of the needs appraoch? |
Calculations more involved |
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What is TPD? |
Lump sum payment when total and permanently disabled -> will never work again -> consequences of significant illness or accident Categories: Medical and other costs associated with disablement Ongoing support of the client and dependents |
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What are the business uses of TDP? |
1. may be provided as an employment benefit 2. key person insurance: cover for an employee on whom business depends => hiring/training costs of new employee + loss of income 3. own occupation TPD: paid if unlikely can ever perform the duties of your 'own' occupation ever again; only available for specific occupations 4. any occupation: paid if unlikely work in any occupation ever again Premium not tax deductible so not taxable May be tax deductible if held outside the super environment |
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Compare the advantages/disadvantages of having insurance outside/inside super? |
+ All insurance (TPD 'own) vs - can't have TPD own and trauma insurance vs + premium with pre-tax $ so cheaper vs + automatic acceptance with no medical history check vs + bulk buying power to achieve premium concessions from an insurer + immediate access because benefits are paid directly to policy owner vs - may not be able to access benefits until retirements + portable vs - have to apply for new insurance if change - may look up health history/may not get it or may cost more + Life and TPD not taxed vs life and TPD may be taxed; depend on how is being paid vs - taxation of TDP benefits is significant |
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What does the insurer have to do? |
1. PDS - description of policy + factors associated with premium + taxation + other relevant issues |
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What is the duty of those applying for insurance? |
Insurance Contracts Act 1983 Have to disclose material information Material that the client could reasonably be expected to know is relevant to insurer's decision Otherwise insurer may be able to reduce amount payable or deny cover |
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What type of premiums are there? |
Stepped: dollar of insurance cover becomes more expensive by age Level: Calculate average premium - pay more when younger but less when older - greater long-term saving - up to 50% |
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What do premium rates depend on? |
1. Sex: females live longer so cheaper 2. Age: Risk of death increases with age so premiums increase (with exception of young adult males) 3. Smoking: Smokers pay higher premiums |
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What are the types of policies? |
1. Term: Premium set no higher than is needed to provide the insurance cover required 2. Whole of life: premium includes an investment component, enabling a level premium over the whole of life 3. Endowment: operates like whole of life but maturing at a specified aged or at the end of a fixed term |
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What is income protection insurance? |
Replace income when total disabled (excludes self-inflicted) Income = total renumeration package = salary + fees + commissions + regular bonuses + regular overtime + super + fringe benefits OR if self employed income by personal exertion - costs Benefit: Up to 75% of monthly income. Will cover 10 - 15% if used for super. Benefit period: maximum period benefit is payable e.g. 1,2,5, until 65, lifetime Qualifying period: period at start of incapacity during which insurance has elected no benefit shall be paid under income protection policy e.g. 14, 30, 60, 90 days, 6 mhts, 1 - 2years * Longer waiting periods => fewer claims => cheaper premiums => dramatic drop in premium when waiting period is increased from 14 - 60 days |
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What medical services are covered by medicare? |
1. doctor's and specialist's consultations 2. anesthetics 3. obstetrics 4. radiology 5. xray; pathology tests and other similar tests 6. optometry 7. surgical procedures approved by dentists 8. certain cleft lip and palate procedures |
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Whats not covered by medicare?
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1. hearing aids and dental care 2. ambulance 3. home nurses 4. costs incurred as a private patient 5. pysio, speech and OT 6. Chriopody, psychology and chiro 7. osteopathy 8. prosthesis costs |
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Explain medicare? |
Funded from gov revenue + 2% levy (rises when income over threshold + have no private health insurance) Treat at public hospital at no charge or if want to be treated as a private patient 75% of schedule fee 85% outside of hospital |
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are the benefits from private health funds? |
1. Greater choice + flexibility 2. Can choose own doctor 3. Choose when admitted to hospital 4. Pay for costs |
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How is the government trying to increase the amount of people who have private health insurance? |
1. Medicare levy surcharge 2. 30% rebate on private health insurance 3. Lifetime Health cover initiative - increases premium payable by 2% for each year after 30 a person is when they take out the cover |
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What are the membership categories? |
Single Family: applicant + 1 adult + dependent children Couple: applicant + 1 other Single parent: Applicant + dependent < 18 or < 25 if studying full time |
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What are the two types of benefits under medicare? |
1. Hospital cover: reimburse cost of hospital and medical expenses 2. Ancillary cover - reimburses range of non-hospital charges e.g. physio, podiatry, glasses, contact lenses, home nursing |
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What are the types of general insurance? |
Indemnity: MV at time of loss - might not be enough to replace property Replacement value: new for old policites Contribution: insurance held with more than one company over the same asset - each obliged to pay only part of the claim in proportion to the amount of cover they are sharing Subrogoation - client has right to recover third party as well as make an insurance claim => right to sue is transferred as a contratual term of the policy to the insurance company Co-insurance: insured person does not insure for the full value - self-insure part |
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How to calculate sum insured for house |
Include: * cost to rebuild house + other buildings + fences + swimming pool + architect fees + demolition fees + debris removal |
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How can claim under house insurance? |
Evidence for high value items e.g. receipts, invoice, photos If someone broke into property - inform police and get crime reference number |
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What are included in contents insurnace? |
Two types: 1. Evertyhing covered except exclusions 2. Nothing covered except inclusions => more certainty Includsions: fire, explosion, lightning, earthquake, wind, rain, hail and snow Exclusiions: deterioration, water entering house because of building defects or open windows, flood, landslides, subsidence or erosion |
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What is motor vehicle insurance? |
CTP: bodily injury to 3rd party Full comprehensive: damage to vehicle and property damage to third party Third party fire and theft: cover for property damage to third party (no cover for vehicle itself) |
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What are some other types of insurance? |
1. Personal property insurance - accidental loss or damage to personal property in Australia 2. Legal liability insurance 3. Flood 4. Professional indemnity - negligent acts, errors or omissions by professionals |
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Would could you suggest to a client to lower the premium on his or her income-protection policy?
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1. Premium reduction -> although reduced cover 2. Increasing waiting periods 3. Bundle policy with one insurer or builder through superannuation 4. Reduce their risk factors |
