Insurance Planning Assigment 1 Group 2

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Lambton College *

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1194

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Finance

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Feb 20, 2024

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FIN 1194 Insurance Planning FIN 1194 Insurance Planning Assignment 1 Group 2 Name Student ID Beyza Kaçar C0872017 Akshat Nohwal C0882183 Ramandeep Kaur C0882485 Nima Tshering Tama C0879697 Kevin Dobariya C0885829 Nayan Babubhai Patel C0886249 © 2023 LAMBTON COLLEGE IN TORONTO

FIN 1194 Insurance Planning Assignment #1 (Online) – Group #2 . ❑ 10 Andrew was diagnosed with inoperable cancer, which was very upsetting to him and wife Sara. The couple operated a small business that required both of them to contribute significantly to ensure its success. Because of Andrew’s illness, he could not spend much time working at their business. Sara was also unable to spend a lot of time with their business because she was trying to help Andrew with his needs. Andrew’s doctors told him that he was not expected to live longer than one year. Business revenues began to decline and the couple were faced with bankruptcy. Andrew died approximately 6 months later, after which Sara was able to resume working. After carefully assessing the above situation, discuss what you feel would have been the best possible insurance-related product or combination of products for your client(s). Be sure to consider your client(s)’ current and future needs. © 2023 LAMBTON COLLEGE IN TORONTO

FIN 1194 Insurance Planning Considering the unfortunate situation of Andrew's inoperable cancer diagnosis and subsequent death, the couple was facing financial difficulties due to the decline in business income. Having appropriate insurance-related products to handle such situations could have supported Andrew and Sara financially during these difficult times. We examine the importance and benefits of insurances that needed below. Life Insurance: A life insurance policy is an arrangement between a person (the policyholder) and an insurance company. The insurance company guarantees to pay the specified beneficiaries a lump sum payment, also referred to as a death benefit, if the insured person dies. The policyholder typically pays a premium to the insurance company in exchange for this coverage, either once or regularly (monthly, quarterly, or annually). (Tan, 2021) Life insurance has several benefits, chief among them being financial protection. The death benefit assists in paying for funeral costs, unpaid bills, mortgage payments, and continuing living expenses in the event of the insured's passing. Insurance companies offer Riders, which are extra features that may be added to plans for a cost in order to personalize coverage further. Popular coverages include.  Premium waiver, which forgoes future premium payments in the event of disability.  Accidental death benefits, which boost death benefits and  Accelerated death benefits grant access to a portion of the death benefit if the insured is diagnosed with a terminal illness. (CORE BENEFIT GROUP, 2018) Offers rewards in the event of a fatal accident. These adjustable characteristics enhance the policy's adaptability, which enables policyholders to customize coverage to meet their unique requirements and situations. For Andrew: If Andrew had had a life insurance policy, Sara might have received a death benefit after his passing. The payment could have helped pay for emergency costs, including funeral and hospital expenses and outstanding business debt. For Sara: The life insurance premium could have served as an insurance policy for Sara's finances following Andrew's passing. This might have assisted her in paying for continuing living expenditures, business expenses, and even future investments in the company's recuperation. In the present circumstance, the couple's modest firm was severely impacted financially by Andrew's diagnosis of incurable cancer and his consequent incapacity to work, which resulted in lower sales and the imminent risk of bankruptcy. A life insurance policy with the Expedited Death Benefit Rider would have been beneficial in this case, especially considering Andrew's terminal illness. Suppose an insured person is diagnosed with a terminal disease like Andrew was. In that case, they may be eligible to collect a portion of the death benefit while living, thanks to the Accelerated Death Benefit Rider. This advance payment could have given the couple much-needed financial support to pay medical bills, compensate for lost income from Andrew's incapacity to work, and keep their business afloat during this trying period. Moreover, in the event of Andrew's passing, monies may have been used to purchase Sara's interest in the company or help stabilize it if they had Business Continuation Coverage on their life insurance policies. This would have helped guarantee the © 2023 LAMBTON COLLEGE IN TORONTO

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FIN 1194 Insurance Planning business's ongoing operations and reduced some of Sara's financial strain. Having adequate life insurance coverage would have helped Andrew and Sara with their financial struggles and freed them up to concentrate on Andrew's care rather than worrying about money. Disability Insurance: Disability insurance, also known as disability income insurance or disability income protection, is a type of insurance coverage that provides financial security to people who are unable to work due to a disability or illness. This insurance is intended to replace a portion of the insured person's income if they become disabled and unable to work, assisting in paying important expenses such as mortgage or rent, groceries, and medical bills. Disability insurance often covers a percentage of the insured's individual's pre-disability income, subject to a policy limit. The benefit amount and duration of coverage can vary depending on the insurance terms and the individual's needs. There are two types of disability insurance: 1. Short-Term Disability Insurance: This type of disability insurance provides coverage for a limited time, typically up to a year. Its purpose is to provide income during temporary disabilities, such as recovery from surgery or injuries. Short-term disability insurance benefits normally begin shortly after the onset of disability and last for the specified benefit period. 2. Long-Term Disability Insurance : Long-term disability insurance covers disabilities that last for an extended period, generally many years or until retirement. It is intended to replace income during long-term disabilities that prevent the insured person from working in their current occupation or any occupation, depending on the policy terms. Long-term disability insurance benefits frequently have a waiting period (known as an elimination period) before payments begin, which can be several weeks or months. There are various sources of disability insurance coverage:  Government Disability Programs : Government-run disability programs include the Canada Pension Plan Disability (CPP-D) and provincial disability programs. These programs provide financial help to people with severe and long-term disabilities who meet certain eligibility requirements. Furthermore, if you get a CPP disability and have children under 25 years of age, you may be eligible for the CPP children's benefits for dependents under 25 .  Employer-Sponsored Disability Insurance: Many employers provide disability insurance coverage in their employee benefits package. The benefits and eligibility conditions for this coverage may vary. © 2023 LAMBTON COLLEGE IN TORONTO

FIN 1194 Insurance Planning  Individual Disability Insurance Policies : Individuals can also purchase disability insurance directly from insurance firms to supplement the coverage given by their employer or government program. People may also have purchased private disability insurance through their own health insurance plan. This can be done regardless of current group insurance coverage to supplement or improve overall coverage in the case of disability. For Andrew: When his sickness prevented him from working, disability insurance coverage may have replaced his lost income. This would have contributed to the couple's and the company's continued financial stability. For Sara : Disability insurance might have offered an extra source of income to sustain the family and the business if Sara could not work due to her husband's illness or for other reasons. Business Interruption Insurance: This kind of insurance helps businesses cover costs and lost revenue when regular business operations are disrupted. In this instance, business interruption insurance might have helped cover continuing business expenses if Andrew's illness resulted in a drop in sales. Business interruption insurance provides financial protection against income losses resulting from unanticipated occurrences that disrupt regular operations, making it a crucial part of risk management for firms. This kind of insurance is intended to lessen the financial burden of disruptions brought on by calamities like fires, natural catastrophes, equipment failures, or other unforeseen circumstances. After a waiting period—typically 48 to 72 hours—specified in the policy, the business interruption insurance coverage period usually starts. It lasts until the business reopens fully or until the policy's limit is met, whichever comes first. It is imperative that business owners thoroughly go over the terms and conditions of their policy to comprehend the coverage that is provided as well as any potential exclusions or limits. For Andrew: Andrew and Sara had business interruption insurance, they would have been compensated for the money they lost while their company was unable to run at maximum efficiency. This would have lessened some of their financial hardship by assisting them in paying for regular costs like rent, utilities, and payroll. Furthermore, it's possible that the policy covered additional costs expended to lessen the effects of the disruption, such employing temporary workers or putting alternate business plans into place. For Sara : Business Interruption Insurance would have been an invaluable resource for Sara during Andrew's illness and after his passing. It would have provided financial support, allowing her to manage the business and attend to Andrew's needs without facing the threat of bankruptcy. This insurance product would have helped Sara navigate the challenging circumstances with greater financial security and peace of mind. © 2023 LAMBTON COLLEGE IN TORONTO

FIN 1194 Insurance Planning Insurance for Critical Illnesses: Andrew might have received a lump sum payment from critical illness insurance coverage if he had been diagnosed with a severe illness. This sum may have reduced the family's financial burden, paid for specialized medical care, or covered other medical expenses. Critical illness insurance is an instance of insurance coverage that compensates individuals handsomely if they are diagnosed with a serious disease. It usually pays out a lump sum benefit upon diagnosis of a covered sickness, which can be used to pay for medical payments, living expenses, or any other financial requirements that may show up during the illness.  Criteria for categorizing critical illness insurance: Insurance policy: The product must be an insurance policy that covers severe diseases. Individuals must be financially protected under the insurance in the case of a serious sickness. The insurance must pay out a lump sum payout upon the diagnosis of a covered sickness. Covered diseases: The insurance must define which illnesses are covered. The benefit can be used to pay for medical expenditures, living expenses, or other financial requirements.  Variable features for categorizing critical illness insurance: Premiums: The insurance may demand consumers to pay recurring premiums in order to be covered. Waiting time : The policy may require a waiting period before payments are given out upon diagnosis. Benefit amount: The policy might specify a specific benefit amount or a range of benefit amounts. Renewability: The insurance may be renewable, enabling individuals to continue receiving coverage beyond the first term. In essence, critical illness insurance is a type of insurance policy that provides financial protection to people who have been diagnosed with a catastrophic disease. (BURIAL INSUANCE , 2020) It provides a lump sum payment upon the diagnosis of a covered sickness and can be utilized to meet a variety of financial requirements. Variable policy elements include premiums, waiting periods, benefit amounts, and renewability. (Brillant - The insurance service company , 2023) Insurance for Long-Term Care: Long-term care insurance might have assisted in covering the costs of Andrew's medical and caregiving requirements, given his sickness and the ensuing care he needed, guaranteeing a higher standard of care without straining the family's finances. Long-term care insurance is a unique kind of insurance meant to pay for basic care if you are unable to take care of yourself and are unable to perform two or more activities of daily living, such as eating, dressing, using the restroom, bathing, and porting/transporting. (LONLFINANCIAL , 2020) The insurance provider will then pay the monthly benefit which may be based on the original subscription if the inflation option is not taken or greater if it is if you qualify by being unable to perform any two or more activities of daily living. These benefits will be provided for the length of a predetermined period, as specified in your policy (e.g., two years), or until you get healthy again. (LSM INSURANCE , 2023) © 2023 LAMBTON COLLEGE IN TORONTO

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FIN 1194 Insurance Planning Since the benefit is tax-free, no tax receipt is now needed, thus it does not affect any other benefits you may be eligible for. Generally, no receipts are needed; that is after a claim is approved, the insurance company pays the money without asking any questions. (Erginom, 2019) For Andrew : Andrew's diagnosis is less than a year, indicating a rapid decline in his health and a greater need for specialised care. He was diagnosed with incurable cancer. His condition has caused him to have less income and financial burden, which makes specialised therapies and help with daily duties necessary. Financial security for medical expenses, home help, and possible stays in assisted living or nursing homes can be obtained with long-term care insurance. For Sara : Sara, Andrew's principal carer, may experience financial difficulties, due to her caregiving responsibilities. This might have an impact on their stability and revenue. If Sara's health worsens or she need assistance as she gets older, she might require long-term care. To help Sara take breaks and keep up her wellbeing, long-term care insurance can provide support services and respite care. Without relying on Andrew's coverage, this policy safeguards Sara's financial stability and guarantees that she can get the help and care she needs. Based on their distinct demands and financial situation, Sara and Andrew each have individual long- term care insurance policies. Whereas Sara's plan gets ready for future care needs, Andrew's plan offers specialised care and assistance services. With the assurance that they have the tools and assistance they need to address their changing care demands, this comprehensive coverage guarantees that they can face their health issues head-on. © 2023 LAMBTON COLLEGE IN TORONTO

FIN 1194 Insurance Planning Reference :- Brillant - The insurance service company . (2023). Critical Illness Insurance: What is it & Why do You Need It? Retrieved from Brilliant Insurance : https://brilliantinsurance.us/blog/critical-illness- insurance-what-is-it-why-do-you-need-it BURIAL INSUANCE . (2020). https://insuranceforburial.com/blog/category/burial-insurance/ . Retrieved from INSURANCEFORBURIAL.COM: https://insuranceforburial.com/blog/category/burial-insurance/ CORE BENEFIT GROUP. (2018, JUNE 12TH). SBLI . Retrieved from CORE BENEIFTS GROUPS: https://www.brokercontracting.com/sblivideo.html Erginom, S. (2019, october 23). The Truth About Life Insurance Companies . Retrieved from Banking Deal: https://bankingdeal.com/life-insurance-companies/ LONLFINANCIAL . (2020, JANUVARY 31). Buttigieg’s Long Term Care Plan . Retrieved from LONG TERM CARE: https://1on1eldercare.com/buttigiegs-long-term-care-plan/ LSM INSURANCE . (2023). LONG TERM CARE INSURANCE QUOTES AND EXPERT TIPS . Retrieved from LSM insurance : https://lsminsurance.ca/canadian/long-term-care Tan, J. (2021). MGS OFFSHORE . Retrieved from Marine Cargo Insurance: https://mgsicestorm.com/marine-cargo-insurance/ © 2023 LAMBTON COLLEGE IN TORONTO