FPC004 Insurance Advice - Assessment Questions

Section B

Question 2 (5 marks | Word limit: 150 words)

Describe and distinguish the features of the various types of personal and business insurance products, including related policy documentation and taxation issues.

Jordin (27) and Dana (28) run a business as co-directors and owners of a small company, Sparkle. They are equally important to the income of the business and are considering taking out insurances to protect them both, in the event that something happens to either of them. Describe to them the various tax implications of the following strategies for ownership of life insurance:

(i) a term life insurance policy owned and purchased by Dana (1 mark)

(ii) an income protection owned by Jordin, with Sparkle paying the premium (1 mark)

(iii) a trauma policy owned and paid for by Jordin (1 mark)

(iv) a key person life insurance policy owned by Sparkle that is intended to replace lost revenue in the event that either Jordin or Dana dies or is totally and permanently disabled. (2 marks)