ACCT 2287 Risk – Insurance and Social Security-various aspects of insurance


Question 1

As a result of the COVID lockdown in Victoria you have created a blog site which discusses various aspects of insurance. On your site you have a Q & A section where you invite questions from your subscribers.

Last month your subscribers sent you the following three queries:

1. Can you explain the concept of the law of large numbers?

2. What is the purpose and meaning of “deeming” used by the Government to determine an age pensioners ability to claim the Age Pension?

3. What does the term endorsement mean on an insurance policy?


Please respond to the above three queries and where possible provide an example to help explain the concepts.

Question 2

You sent the company’s insurance adviser the following queries.  

1. Are the premiums on the three polices deductible for taxation purposes for the company? 

2. Poh wants to sell her share of the company. Will any of the insurance proceeds be available to pay out Poh’s share of the company?

3. The first policy covers interruption of the policy caused by external factors. Will this cover the loss of profits because of the COVID19 outbreak? How would you determine if the policy covers this event or not?


As the insurance adviser please provide answers to the three queries raised by the company. 
Question 3

You are their financial adviser. Ted and Sandra have a zoom meeting with you in which they have asked you for advice on the following matters:

1. Are they entitled to the age pension?

2. Should Ted retain the life insurance policy in his superannuation fund? The premium is currently $22,890 per annum and comes out of his superannuation fund

3. The income is not enough to live on. Is there some scheme whereby the Government can lend us or give us extra money to live on?

4. Can they draw down on their home to access the equity as they would like to provide their daughter Larissa a lump sum, so she has a deposit to buy her own home. They are not keen on a traditional mortgage to the bank where they have to make regular repayments on the mortgage and would be interested in other options available.


1. Calculate under the assets test and the income test how much, if any, of the Age Pension they would be entitled to and what amount the Government if any would pay them as an age pension.

2. As both Ted and Sandra have no debts, should Ted keep his life insurance cover under his super fund, reduce it, or cancel it altogether? 

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