Ch.14 - 2010 Reed International Books Australia Pty Limited...

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© 2011 LexisNexis Australia 1 Financial Planning in Australia 4ed – by Taylor, Juchau, Houterman Solutions by Sharon Taylor Chapter 14 INSURANCE — LIFE, INCOME AND OTHER Solutions to Questions Question 1: Life expectancy tables are used to estimate the period of time that a dependant’s needs are to be met. What problems arise in relying solely on these figures? There are two aspects that need to be taken into account: The life expectancy tables give historical data. If you look over the life expectancy for a number of years you will see that the life expectancy is increasing. This can be attributed to improved and healthier lifestyles and advances in medical science. The life expectancy tables show the average age. This means that 50% of the people will live longer than the figures produced. In using these figures to calculate a sum insured a longer life expectancy should be considered, especially when a person has a family history of longevity. Question: What are the differing needs that you would expect to find with: a a single person; b a married couple with a young family; and c a mature couple approaching retirement? Single person They would normally have no dependants, although this cannot be assumed so inquiries should be made. There may be a child or relative that is dependent on them. The needs that exist would be to pay out any debts such as amounts owing on a house or other asset, credit card etc; make provision for final medical and funeral expenses. Married Couple There will be a need to provide for dependants until the dependency ceases. This could be children, spouse or dependent relatives. In addition, are there any debts — mortgages, loans or credit cards etc — that need to be paid out? Provision needs to be made to meet any legal expenses, final medical costs and funeral expenses. © 2011 Reed International Books Australia Pty Limited trading as LexisNexis. Permission to download and make copies for classroom use is granted. Reproducing or distributing any material from this website for any other purpose requires written permission from the Publisher. © 2010 Reed International Books Australia Pty Limited trading as LexisNexis. Ancillary for Financial Planning in Sustralia 4ed - Taylor, Juchau, Houterman
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© 2011 LexisNexis Australia 2 Mature couple These would include the same items as the married couple except that the dependency would probably have ceased or be near ceased. Debts also may have reduced considerably as they are moving into a time when saving is predominant. What may arise at this time is, where there is a family business, the need to develop a business succession plan. Apart from deciding who will take over the business, there will be a need to cater for the beneficiaries who will not participate in the business. A life policy can be arranged so that the beneficiary’s share of the business can be bought out. Question 3:
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This note was uploaded on 01/10/2012 for the course FINS 3616 taught by Professor Curry during the Three '10 term at University of New South Wales.

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Ch.14 - 2010 Reed International Books Australia Pty Limited...

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