Bernie and Deena Smith Case Study – Management Assignment Help

Assignment Task


Client – Bernie and Deena Smith Case Study

You are an authorised representative of a full-service licensed dealer group, Swinburne Financial Planning Pty Ltd. Husband and wife, Bernie and Deena Smith, are seeking your advice with regard to their insurance needs.

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Information collected from the fact-finding meeting Employment and Business: 
Bernie Smith is a network security analyst at ZNA bank, earning $120,000 per annum, plus superannuation. He is 48 years old and married to Deena, who is 42 years old and a self-employed dentist. Deena’s annual taxable income is $150,000 after contributing $10,000 per annum to superannuation and paying $45,000 per annum in business overheads. The market value of her dentistry equipment is $110,000 and she owns it outright. 

Bernie and Deena have twin girls who are twelve years old. They currently attend their local state primary school, but next year the girls will attend a private high school where the fees are $22,000 per annum, all-inclusive. Once the girls finish high school, Bernie and Deena plan to pay $22,000 per annum into their superannuation fund to build this up for their retirement.

Assets, Liabilities and Cashflow:
Bernie and Deena’s family home is worth $1.5 million. Their mortgage is $620,000 and they have $45,000 in an offset account. The mortgage interest rate is 4.2% per annum and their monthly repayments are $6,336 ($76,032 per annum). They want to clear this mortgage debt in 10 years.

The couple took out an investment loan of $350,000 to purchase a property worth $580,000. The rental income for this property covers the investment loan repayments and the loan will be cleared in 15 years. Bernie and Deena plan to sell the investment property when they retire and will add the capital to their superannuation to fund their retirement.

Bernie has a share holding from the ZNA bank of $72,000. They each have approximately $200,000 in their respective superannuation accounts, with both life, and total and permanent disability insurance cover of $100,000.

Their living expenses are $78,000 per annum (net of high school fees and mortgage repayments). This leaves a surplus of approximately $24,000 per annum, which they use for holidays and/or small improvements around the house and garden. They have been renewing the same home and content insurance policy for the last nine years.

Lifestyle and Equipment:
Bernie and Deena like to take the girls out hiking and trail bike riding at weekends. Bernie has an interest in rock climbing, and although Deena worries it can be a bit dangerous, he still engages in this activity once every few months. Their bikes and sporting equipment are worth approximately $15,000.

Bernie drives a 2012 Subaru Forester (market value $17,000), but usually walks or drives to the local train station during the week to take the train to work. Deena drives a 2019 BMW X5 (market value $105,000) to work, and parks in the 2-car private garage at the dental practice premises. Both cars are owned outright.

The couple have comprehensive private health insurance cover. Overall their general health is good. Bernie refers to himself as a ‘social smoker’; this means that he will smoke one or two cigarettes a day at work. He tends not to smoke over the weekends around the children or Deena, who does not like him smoking. 

Bernie’s parents are in their late 70s. His father is a smoker but both of his parents are in relatively good health. Deena’s mother died 20 years ago from breast cancer. Her father is in his mid-80s and lives on his own. He has diabetes but is otherwise quite well; Deena wants him to hand in his driver’s licence as due to the diabetes, his vision is deteriorating rapidly.

Purpose for meeting: General notes
Bernie and Deena want to make sure that if either of them were impacted by an unforeseen event, their financial plan and lifestyle would not be affected.
It appears Deena has instigated this meeting.  Bernie asks, ‘Given the cost of insurance, is it really worth it? I know we will have to pay a lot for me because I smoke, but I am not really a smoker! Maybe we should just build our savings and take the chance nothing too bad will happen to us’.

1. Review the client profile details provided. Contact your eLA if you have any questions or wish to add further detail to the client profile.
2. Apply the risk management process (see the following 5 steps) to the Smiths’ situation (maximum 1000 words +/- 10%).

Step 1: Define objectives
Step 2: Identify and measure potential loss exposures
Step 3: Evaluate potential loss exposures
Step 4: Select most appropriate risk management techniques (Note: You can present Step 3 and 4 in matrix)
Step 5: Implement and monitor the program. 

3. Address Bernie’s concerns regarding the purpose and costs of insurance by referring to the following concepts (maximum 1500 words +/- 10%):

  • characteristics of insurance
  • what is an insurable risk
  • types of insurance and tax implications (overview)
  • the key concepts of insurance law
  • how consumers are protected.

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