Planit:Takaful Exercise Answer Key

From Planipedia

Question One:

Abdul Haqq tells you that he owns permanent life coverage of a value of RM 200,000, and he has Group takaful coverage through his work that has a sum assured of RM 75,000 and a participant’s account with RM 5,000. In the event of his disability, his takaful immediately pays out the full amount.

Maznita Omar has no permanent life insurance or takaful, but has family takaful that has a sum assured of RM 90,000 that she plans on participating in until she retires. Another RM 30,000 is from her own participant’s account. It is due to expire in about five years. While active, this policy also pays out its full lump sum on her complete disability. You estimate her participant’s account will grow at 7.0% annually based on her contributions and dividend on investments.

Answer:

Use the screen drop-down menu to skip to the Insurance screen.

1. Under Client’s Permanent Insurance enter $200,000 for Abdul’s permanent life coverage
2. Under Client’s Term/Group Insurance, enter $80,000 (the combined RM 75,000 sum assured and the RM 5,000 participant’s account) for the Group takaful he has through work.
3. In the Spouse’s Permanent Insurance field, enter $0 since Maznita has no coverage.
4. Set the Spouse’s Term/Group Insurance to $120,000 since both the participant’s account of RM 30,000 and the contribution pool will pay out RM 90,000.
5. In the disability section, set the Client’s Lump Sum on Disability to $80,000, the combined values of his takaful accounts.
6. Under Spouse’s Lump Sum on Disability, enter the total $120,000 available from her term takaful.
7. The Will benefits be subject to income tax drop-down menu should be set to No, based on the taxability of insurance benefits.
8. Click Save at the bottom of the screen
9. Use the drop-down menu to continue to the Pensions and Other Revenues screen.

In the event that Maznita does not die or become disabled in the next five years, her short-term family takaful will pay out her participant’s account.

1. Click on the Add button above the current revenue entries
2. Enter an appropriate description in the Description field.
3. In the drop-down menu beside Owner change the setting to Spouse
4. The $30,000 value of the participant’s account (only) can be entered in the Amount per Year field
5. Both the From Year and To Year fields should be set to five years from now when the policy will expire.
6. You have estimated the Index Rate to be 7.0%, based on her continued contribution and the return on her takaful investments so far.

Note: For a more accurate estimate, find out the investment return they client has experienced so far with the takaful, and calculate the contribution as a percent of the current account value. And these percentages together for the Index Rate. OR use the contribution schedule to determine the actual future value of the participant’s account when the policy expires, and enter a corresponding Index Rate of 0.0%.

1. Set the Percent Taxable to 2.5% since it is most likely the revenue will be invested in other financial assets and thus liable to Zakat.
2. The Amount on Death can be set to 0%, the takaful will then payout through the insurance screen.
3. The Amount on Disability would be 0%, for the same reason.
4. The drop-down menu beside Model As should be set to Fixed Period since the takaful will pay out regardless of when she retires.
5. Click Save to return back to the summary Pensions screen