ISR3702
ASSIGNMENT 1
SEMESTER 2 -
2022
,MODULE: IRS3702
UNIQUE NUMBER: Assignment 2
ANSWERS
1
1.1 Show the benefits that Suzan will participate in and give reasons for your answer.
-Susan will benefit on Kego’s Employers group life policy because she is a nominated beneficiary
so she has an insurable interest in it. However, she cannot benefit on the whole amount since
Kego has children who have insurable interest on his life policy though he did not state them as
beneficiaries. The fund owner will decide how much each of them will benefit.
If it is traceable that Susan is Lindi’s and Kego’s dependent she will also benefit on both of their
retirement annuity policy.
1.2 Show the benefits that Karien, Grace and Benny will participate in and give reasons for your
answer
Lindi and Kego’s own life policy
Retirement annuity policy
Employers group life
The three children have an insurable interest in their Parent Lindi’s Own Life Policy because they
are the nominated beneficiaries and they get support from their parents. The owner of the fund
decides how much each child will benefit.
Grace has an insurable interest in Kego’s life policy as well as Benny although Kego did not
nominate them as beneficiaries but by law the children who are still under their parent’s support
have an insurable interest on their Parent’s life policy.
Karian was 21years old after the death of both parents if she was still living with the parents and
their depended she has insurable interest on their own life policy’s and therefore must benefit.
Both children have insurable interest on Kego’s retirement Annuity Policy and Lind’s Retirement
Annuity policy because by law if the policy holders did not nominate a beneficiary the fund must
trace the dependents of the deceased and decide on how much to share each of them.
, 1.3 Show the benefits that Mokoena will Participate in and give reasons for your answer
Kego’s Own Life Policy- Mokoena is Kego’s dependent so he has an insurable interest in his son’s
own life policy
Kego’s retirement annuity- Mokoena is kego’s dependent and has insurable interest on Kego’s
policy.
Both parties own income disability policy- Since Mokoena was receiving a stipend from Kego he
has an insurable interest in Kego’s life and therefore can benefit from own income disability
policy.
1.4 List the benefits that will be excluded from the calculation of estate tax for both parties
Proceeds of life insurance are not taxed in the hands of the recipients. The following list of
policies will be excluded from the calculation of estate tax for Kego and Lindi
1. Own life policy
2. Own critical illness policy
3. Own income disability policy
4. Funeral policy
2.1 Describe a life insurance solution that is appropriate to mitigate the concerns of the board
The life insurance solution that is appropriate to retain a key employee is to adapt the employer
owned fund in such a way that the employee will feel that a real benefit can be reaped for remaining
in the service of the employer. There must be an agreement between the employee and employer
that the employer will pay a special salary increment to the employee that must only be used to
purchase any life insurance policy for example own life policy. The benefit will be in the form of any
life insurance policy desired by the employee but not any retirement annuity contract. The policy
must be ceded to the employer by the employee until a stated period time has been reached as per
agreement for example 15 years. The cession must be a security cession and not an outright cession.
That’s because the policy must remain the property of the employee.
2.2 Describe how the product is quantified
The product that the employee purchases must be a normal policy and must also include if possible
any of the many supplementary or risk benefit available to the policy for the benefit of thelife
insured and, where applicable, his family.
The salary increment offer is supposed to add value on the employee’s reward package. So the
employer must be prepared to pay an amount that covers the employees change in tax value before
the policy premium amount is deductible. It is necessary to first determine the tax due on the
increment and then to ensure that the balance is utilised for the premiums. The proceeds will then
be fully redeemable by the employee on maturity.
ASSIGNMENT 1
SEMESTER 2 -
2022
,MODULE: IRS3702
UNIQUE NUMBER: Assignment 2
ANSWERS
1
1.1 Show the benefits that Suzan will participate in and give reasons for your answer.
-Susan will benefit on Kego’s Employers group life policy because she is a nominated beneficiary
so she has an insurable interest in it. However, she cannot benefit on the whole amount since
Kego has children who have insurable interest on his life policy though he did not state them as
beneficiaries. The fund owner will decide how much each of them will benefit.
If it is traceable that Susan is Lindi’s and Kego’s dependent she will also benefit on both of their
retirement annuity policy.
1.2 Show the benefits that Karien, Grace and Benny will participate in and give reasons for your
answer
Lindi and Kego’s own life policy
Retirement annuity policy
Employers group life
The three children have an insurable interest in their Parent Lindi’s Own Life Policy because they
are the nominated beneficiaries and they get support from their parents. The owner of the fund
decides how much each child will benefit.
Grace has an insurable interest in Kego’s life policy as well as Benny although Kego did not
nominate them as beneficiaries but by law the children who are still under their parent’s support
have an insurable interest on their Parent’s life policy.
Karian was 21years old after the death of both parents if she was still living with the parents and
their depended she has insurable interest on their own life policy’s and therefore must benefit.
Both children have insurable interest on Kego’s retirement Annuity Policy and Lind’s Retirement
Annuity policy because by law if the policy holders did not nominate a beneficiary the fund must
trace the dependents of the deceased and decide on how much to share each of them.
, 1.3 Show the benefits that Mokoena will Participate in and give reasons for your answer
Kego’s Own Life Policy- Mokoena is Kego’s dependent so he has an insurable interest in his son’s
own life policy
Kego’s retirement annuity- Mokoena is kego’s dependent and has insurable interest on Kego’s
policy.
Both parties own income disability policy- Since Mokoena was receiving a stipend from Kego he
has an insurable interest in Kego’s life and therefore can benefit from own income disability
policy.
1.4 List the benefits that will be excluded from the calculation of estate tax for both parties
Proceeds of life insurance are not taxed in the hands of the recipients. The following list of
policies will be excluded from the calculation of estate tax for Kego and Lindi
1. Own life policy
2. Own critical illness policy
3. Own income disability policy
4. Funeral policy
2.1 Describe a life insurance solution that is appropriate to mitigate the concerns of the board
The life insurance solution that is appropriate to retain a key employee is to adapt the employer
owned fund in such a way that the employee will feel that a real benefit can be reaped for remaining
in the service of the employer. There must be an agreement between the employee and employer
that the employer will pay a special salary increment to the employee that must only be used to
purchase any life insurance policy for example own life policy. The benefit will be in the form of any
life insurance policy desired by the employee but not any retirement annuity contract. The policy
must be ceded to the employer by the employee until a stated period time has been reached as per
agreement for example 15 years. The cession must be a security cession and not an outright cession.
That’s because the policy must remain the property of the employee.
2.2 Describe how the product is quantified
The product that the employee purchases must be a normal policy and must also include if possible
any of the many supplementary or risk benefit available to the policy for the benefit of thelife
insured and, where applicable, his family.
The salary increment offer is supposed to add value on the employee’s reward package. So the
employer must be prepared to pay an amount that covers the employees change in tax value before
the policy premium amount is deductible. It is necessary to first determine the tax due on the
increment and then to ensure that the balance is utilised for the premiums. The proceeds will then
be fully redeemable by the employee on maturity.
