Alison and Wayne Hobbins have arranged an initial consultation with a financial planner (Jayne Thomas) to advise them on

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Alison and Wayne Hobbins have arranged an initial consultation
with a financial planner (Jayne Thomas) to advise them on personal
insurance cover in death or disability, considering their current
personal circumstances and financial position. Jayne is an
authorised representative of AFS licensee, Oracle Wealth Pty Ltd.
Alison is 37 and Wayne is 39. They are married with one daughter,
Iris, aged 6, and do not plan on having any further children. Their
daughter is at a local public school and not expected to go to a
private school in the future. Alison and Wayne are both in good
health, are non-smokers, have no family history of hereditary
diseases or early death, and have a family private health insurance
policy. Alison and Wayne have a current Will and Power of
Attorney
Alison works part-time (25 hours per week) as a dental
assistant, earning $40,000 per annum before tax plus 10% in
employer paid superannuation guarantee contributions. Wayne works
full-time (40 hours per week) as a Marketing Manager, earning
$90,000 per annum before tax plus 10% in employer paid
superannuation guarantee contributions. They receive a Family Tax
Benefit from the Government. Alison and Wayne are risk averse and
have relatively healthy savings of $40,000, earning 0.5% interest
per annum in the bank, not offsetting their mortgage.
Alison and Wayne jointly own a house valued at $600,000, with a
$400,000 mortgage. Their mortgage is principal and interest, fixed
for three years at 1.9% per annum, with an annual repayment of
$20,000. They also own other assets valued at $20,000. Alison has
$30,000 in a balanced industry superannuation fund. Wayne has
$120,000 in a balanced industry superannuation fund. Most of the
money that Alison and Wayne earn goes towards paying down their
mortgage and covering living expenses (which are approximately
$50,000 a year). Alison and Wayne do not have any major
expenditures planned. Currently, they do not contribute
additionally into their respective superannuation funds, but they
do pay an additional $500 per month into their mortgage
Alison holds life and total and permanent disability (TPD)
insurance through TAL Pty Ltd, with cover to the amount of $100,000
and a $300 annual premium paid from cash. Wayne holds life and TPD
insurance through TAL Pty Ltd, with cover to the amount of $150,000
and a $550 annual premium paid from cash. He also has additional
income protection insurance through TAL Pty Ltd, with cover to the
amount of $5,500 per month and a $1,350 annual premium paid from
cash.
Alison and Wayne are seeking a review of their personal
insurance needs to ensure that their family has adequate financial
support in the event of death, disability, or illness. Alison and
Wayne both recognise the importance of having comprehensive
insurance cover, especially while Iris is young. They are also
looking for guidance on how they could use any personal cash flow
surplus to reduce their mortgage. Because of the value that they
place on personal insurance, they are willing to spend up to $8,000
of their cash flow per year on insurance premiums. Alison and
Wayne's personal insurance needs are outlined in greater detail in
Table 1, along with Jayne's (and her firm's) commissions paid by
the provider (i.e., financial institution, insurance company, etc.)
for any financial products recommended and subsequently purchased
by the clients in Table 2. Note: the firm charges clients a one-off
$1,750 fee for the advice offered in a limited scope Statement of
Advice, and commission percentages paid by the provider are the
same for each financial product and split 50/50 between Jayne and
the firm. Aside from the one-off fee for advice and financial
product commissions received, there are no other relationships
that may cause conflict of interest or potentially influence the
advice/financial products offered.
Table 1: Alison and Wayne's personal insurance
needs
Cover required for Wayne
Table 2: Financial product commission structure
(%)
Based on your discussions with Alison and Wayne, the following
goals have been established in
terms of meeting their personal insurance cover needs:
1. To protect our family in the event of our death (joint) - to
make sure that the mortgage is
covered, our funerals are paid for and our current quality of
life can be maintained
2. To provide income protection for Wayne if he is off work
temporarily as our household's
livelihood depends on this
3. To protect our family if one of us were unable to work ever
again
4. To seek protection from traumatic events, so that our family
is well protected if something
untoward were to happen to us in terms of our health (i.e.,
heart attack, cancer, stroke, etc).
Task
Assume you are the financial planner. Based on the information
provided above, with producing a write a limited scope
statement of advice in relation to the personal insurance required
by the clients (Alison and Wayne)