Insurance
TRADITIONAL LIFE REVIEW
March 2015 version
1
Course Content
I.
The Insurance Commission
II.
Insurance Commission Exam/Insurance Institute for Asia and the
Pacific-Validating Final Exam
III.
Concepts of Life Insurance
IV.
Premium, Basic Plans and Riders
V.
Legal Aspects of Life Insurance
VI.
Policy Provisions
VII. Annuities
VIII. Ethics
2
The Insurance Commission
March 2015 version
3
Insurance Commission
• Regulatory government
agency
• Executes all laws
pertaining to insurance
• Regulates insurance
companies
4
Insurance Commission
Functions of the Insurance Commission
• Issues licenses to insurance companies
• Reviews policy contracts and premium rates
• Examines the financial condition of insurance companies to
ensure solvency
• Renders assistance to the public on matters pertaining to
insurance
5
Insurance Commission
Location of the Insurance Commission
1071 United Nations Avenue cor. Romualdez St., Ermita, Manila
6
Insurance Commission
Insurance Code of the Philippines
• Rendered the provisions of
Presidential Decree No. 612
• Promulgated in 1978
• Also known as Presidential Decree
No. 1460
• Special law to govern insurance
7
Insurance Commission
Built on Trust
• Between the company, the
advisor and the client
• Importance of upholding
professionalism and proper
ethics
8
Concepts of Life Insurance
TRADITIONAL LIFE Insurance Concepts
March 2015 version
9
Concepts of Life Insurance
Man at Work
INCOME
EXPENSES
In Memory
OLD AGE
10
DISABILITY
DEATH
SICKNESS
Concepts of Life Insurance
Man at Work
INCOME
“Life Insurance is against all
O.D.D.S!”
11
EXPENSES
LIFE INSURANCE
Concepts of Life Insurance
THREATS
In Memory
SERVICE
BENEFIT
Family
Protection
Death
Benefit
Retirement
Income
Maturity
Benefit
DEATH
OLD AGE
Guaranteed
Savings
SICKNESS & DISABILITY
12
Cash
Values
Concepts of Life Insurance
Human Economic Value
•
Human life has an economic value
•
The capitalized monetary worth of the earning
capacity of an individual devoted to the support of his
family during his working lifetime
13
Concepts of Life Insurance
Life Insurance
A
RISK–SHARING
BUSINESS
14
Concepts of Life Insurance
Risk Sharing
• A group of people places a fund together in
preparation for an uncertain event.
• Everyone is prepared to accept a small loss to
compensate the unfortunate from the effect of a
larger loss.
15
Concepts of Life Insurance
What is Risk?
• Chance of loss.
• Exists when there is
uncertainty about the future.
16
Concepts of Life Insurance
Types of Risk
1. SPECULATIVE RISK – involves three possible
outcomes: loss, gain, or no change.
2. PURE RISK – is a risk that involves no
possibility of gain; there is either a loss or no
loss. May be insured.
17
Concepts of Life Insurance
Law of Probability
• A likelihood that a given event will occur in
the future.
• This is used in determining the number of
people dying & living at a particular age w/in
a given period.
18
Concepts of Life Insurance
Law of Large Numbers
• The more frequent a particular event is
observed, the more likely that the observed
results will approximate the true probability
of the event happening.
19
Concepts of Life Insurance
Risk Selection/Underwriter
• is a systematic evaluation of an
insurance applicant for the
purpose of determining the
classification of risk for possible
coverage
20
Concepts of Life Insurance
Anti-Selection
• is the high pre-disposition for those
with impairments to purchase life
insurance
• Can be prevented through proper
Risk Selection / Underwriting
21
Concepts of Life Insurance
Factors in Risk Selection
PHYSICAL
OCCUPATION
FINANCIAL
MORAL HAZARD
AVOCATION
RESIDENCE/TRAVEL
22
Concepts of Life Insurance
Sources of Information
23
•
Application Form
•
Medical Examination Report
•
Agent’s Confidential Report
•
Medical Impairment Bureau (MIB)
Concepts of Life Insurance
RISK CLASSIFICATION
ACCEPT
STANDARD
24
SUBSTANDARD
DECLINE
Concepts of Life Insurance
Basic Insurance Terms
• Life Insurance Policy
• Face Amount
• Insured
• Premium
• Insurer
• Death Benefit
• Policyowner/ Applicant
• Maturity Benefit
• Beneficiary
• Cash Values
• Dividends
25
Concepts of Life Insurance
Basic Insurance Terms
Life Insurance Policy
as defined by the Insurance Code P.D. 1460
A contract whereby a PARTY for a CONSIDERATION
agrees to pay ANOTHER a SUM OF MONEY in the
event of his DEATH FROM ANY CAUSE NOT
EXCEPTED IN THE CONTRACT, or upon surviving a
SPECIFIED PERIOD, or otherwise on the
CONTINUANCE or cessation of life.
26
Concepts of Life Insurance
Life Insurance Policy
as defined by the Insurance Code P.D. 1460
Party – Insured & Insurer
Consideration – premium payment/policy payment
Another – Beneficiary
Sum of Money – proceeds/face amount/face value
Death from any cause not excepted in the contract – excluded risks
Specified period / Continuance – Maturity period
27
Concepts of Life Insurance
Insurer
- The insurance company
Insured
- The person whose life is covered under the insurance
policy.
Policyowner/Applicant
- The person who is buying or applying for life insurance.
28
Concepts of Life Insurance
Beneficiary
- The person who is designated to receive
the insurance proceeds upon death of the
insured.
Face Amount
- The amount stated in the policy as payable under a life
insurance policy if the insured dies while the policy is in
force.
29
Concepts of Life Insurance
Premium
- is a sum of money given by the insured as
a consideration for the insured’s promise
to indemnify or replace the loss.
Death Benefit
- is the amount payable upon death of insured. The sum
assured the beneficiary (ies) would receive in case the
insured dies during the protection period.
30
Concepts of Life Insurance
Maturity Benefit
- is the amount payable if the insured
outlives the protection period
Cash Values
- The guaranteed amount received in case the plan is
terminated prior to the death of the insured or maturity of
the policy
- legal reserves or the savings element of the policy.
31
Concepts of Life Insurance
Dividends
- is a return of excess premium paid annually to owner of
insurance policy based on insurer’s performance and
experience over a given year.
32
Concepts of Life Insurance
Cash Needs: CReFaLEER
C
Clean Up Fund
Fund to pay hospital bills, funeral expenses, and taxes
Re
Readjustment Fund
Fund used to cushion immediate life style adjustment that family must make if the insured die
Fa
Family Dependency Fund
Fund to provide for the family’s needs while the children still dependent
L
Life Income for the Widow
Lifetime fund for the widow
E
Educational Fund
Fund that will ensure the education of children
E
Emergency Fund
Fund that is designed to provide financial back up for unexpected
R
Retirement Fund
33
Fund that gives security and peace of mind who have outlived their earning years
Concepts of Life Insurance
Life Insurance gives certainty
to uncertainty
Death is a certainty
When, is an uncertainty
To live is one’s right
How long isn’t one’s choice
Life insurance cannot prevent your death
It prevents your plans from dying with
you
34
Premiums, Basic Plans
and Riders
TRADITIONAL LIFE Insurance Concepts
March 2015 version
35
Premiums, Basic Plans & Riders
Concept of Premium
•
36
An ACTUARY is the /a company officer that determines
the premium rates with respect to the principal elements
of the life insurance
Premiums, Basic Plans & Riders
Factors that affect the premium:
1. Mortality
2. Interest
3. Expense
37
Premiums, Basic Plans & Riders
Types of Premium
38
•
Natural Premium
o premiums that increase each year as the age of the
insured increases.
•
Level Premium
o premiums that remain the same from year to year
throughout the premium paying period.
Premiums, Basic Plans & Riders
CLASSIFICATION OF
BASIC PLANS
According to
NATURE
39
According to
PARTICIPATION
According to
COVERAGE
Premiums, Basic Plans & Riders
CLASSIFICATION OF
BASIC PLANS
According to
NATURE
40
According to
PARTICIPATION
According to
COVERAGE
Premiums, Basic Plans & Riders
ACCORDING TO NATURE
TEMPORARY / TERM
LEVEL TERM
DECREASING
TERM
PERMANENT
ORDINARY /
WHOLE LIFE
Limited Pay Life
41
ENDOWMENT
Regular
Endowment
Pure
Endowment
Anticipated
Endowment
Premiums, Basic Plans & Riders
Temporary or Term Plan
• Life Insurance that remains in force for a
specified period or term
• Term pays the face amount only in the event of
death
• There are no cash values, no profit sharing, and
is the cheapest in terms of initial premium
outlay
• Renewable & Convertible
42
Premiums, Basic Plans & Riders
Renewable
Example: Yearly Renewable Term
Protection Period
Age 30
43
Renewable for another year
Age 31
Age 32
Premiums, Basic Plans & Riders
Convertible
Example: 5 Year Convertible Term
Protection Period
Age 30
Age 33
Age 35
May be converted in
whole or in part
44
Premiums, Basic Plans & Riders
Types of Term Plans
1. Level Term
o the death benefit remains constant over the term of
coverage
2. Decreasing Term
o the death benefit starts at the set face amount and
then decreases over the term of the coverage.
45
Premiums, Basic Plans & Riders
Types of Term Plans
1. Level Term
Example: 5 Year Level Term
Face Amount
Php 3M
Php 3M
5 Years
46
Premiums, Basic Plans & Riders
Types of Term Plans
2. Decreasing Term
Example: 5 Year Decreasing Term
Face Amount
Php 5M
Php 2.5M
Death Benefit
47
5 Years
Premiums, Basic Plans & Riders
Whole Life Plan
• Life Insurance that remains in force during the
insured’s lifetime
• The face amount is paid whenever death occurs
up to the age of 100 of the insured.
• There are cash values as well as profit sharing
and dividends.
• The initial premium outlay is higher than term
insurance but is lower than endowment.
48
Premiums, Basic Plans & Riders
Whole Life Plan
Protection Period & Premium Paying Period
Age 30
49
Age 65
LB = CV+AD
Age 75 (RIP)
DB = FA+AD
Age 100
MB = FA+AD
Premiums, Basic Plans & Riders
Limited Pay Life Plan
• Provides lifetime protection with premiums
payable for limited term of years.
• Life Insurance that remains in force during the
insured’s lifetime
• The face amount is paid whenever death occurs
up to the age of 100 of the insured.
• There are cash values as well as profit sharing
and dividends.
50
Premiums, Basic Plans & Riders
Limited Pay Life Plan
Example: 10 Year Limited Pay Life Plan
Protection Period
Age 30
Age 40
Premium Paying Period
51
Age 65
LB = CV+AD
Age 75 (RIP)
DB = FA+AD
Age 100
MB = FA+AD
Premiums, Basic Plans & Riders
Endowment Plan
• Pays the face amount whether the life insured
lives to the end of a specified period or dies during
that period.
• It has cash values, profit sharing or dividends.
• Initial premium outlay is the highest compared to
term and permanent plans.
• Allows for faster accumulation of funds, making it
ideal for saving for future needs.
52
Premiums, Basic Plans & Riders
Endowment Plan
Example: 20 Year Endowment Plan
Protection & Premium Paying Period
Age 40
53
Age 50 (RIP)
DB = FA+AD
Age 60
MB = FA+AD
Premiums, Basic Plans & Riders
Types of Endowment Plan
1. Regular Endowment
a. Age-based
b. Term-based
2. Pure Endowment
3. Anticipated Endowment
54
Premiums, Basic Plans & Riders
Types of Endowment Plan
1. Regular Endowment
a. Age-based - provides maturity benefit
at a specified age (Ex. Endowment at 65)
b. Term-based - provides maturity benefit at the
end of a specified period
(Ex. 20 Year Endowment)
55
Premiums, Basic Plans & Riders
Types of Endowment Plan
2. Pure Endowment
• Promises to pay the face amount only if the
insured survives up to the end of the
endowment period
• Nothing will be paid if death occurs before
the end of the endowment period.
56
Premiums, Basic Plans & Riders
Types of Endowment Plan
3. Anticipated Endowment
• Policy owner does not have to wait for the
maturity date of before a portion of the face
amount is given
57
Premiums, Basic Plans & Riders
CLASSIFICATION OF
BASIC PLANS
According to
NATURE
58
According to
PARTICIPATION
According to
COVERAGE
Premiums, Basic Plans & Riders
CLASSIFICATION OF
BASIC PLANS
According to
NATURE
59
According to
PARTICIPATION
According to
COVERAGE
Premiums, Basic Plans & Riders
ACCORDING TO PARTICIPATION
PARTICIPATING
60
NON
PARTICIPATING
Premiums, Basic Plans & Riders
Participating vs. Non-participating
•
Non-Participating
o is one in which the policy owner does not share in
the insurer’s dividends.
•
Participating
o is one under which the policy owner shares in the
insurance company’s dividends.
61
Premiums, Basic Plans & Riders
CLASSIFICATION OF
BASIC PLANS
According to
NATURE
62
According to
PARTICIPATION
According to
COVERAGE
Premiums, Basic Plans & Riders
CLASSIFICATION OF
BASIC PLANS
According to
NATURE
63
According to
PARTICIPATION
According to
COVERAGE
Premiums, Basic Plans & Riders
ACCORDING TO COVERAGE
INDIVIDUAL LIFE
64
JOINT LIFE
GROUP LIFE
Joint Life
Contributory
Joint and Last
Survivor
NonContributory
Premiums, Basic Plans & Riders
Individual Life
• Provide protection to one person only. There is
only one Insured in this type of plan
• May be payable annually, semi-annually or
quarterly basis.
• Individual policies may also be paid on a
monthly basis in the form of Salary Savings
insurance.
65
Premiums, Basic Plans & Riders
Joint Life
• Joint Life plans provide protection to two or
more persons, allowing a single plan to have 2
or more Insured's.
66
Premiums, Basic Plans & Riders
Types of Joint Life
• Joint Life
o Death benefit payable at first death, after which the
policy terminates.
• Joint and Last Survivor
o insurance coverage is extended until the last person
being covered in the policy dies.
67
Premiums, Basic Plans & Riders
Group Life
• Provides protection to a group of people
• A single master policy under which individuals
in a natural group (such as employees of a
business firm) are insured
68
Premiums, Basic Plans & Riders
Types of Group Life
•
Non-contributory
o employer pays for the premium; 100% of the
employees are included in the policy
•
Contributory
o employer and the employees share in the premium
payment; at least 75% should be enrolled
69
Premiums, Basic Plans & Riders
Riders
• Are supplementary contracts that when
attached to the basic policy, will provide
additional benefits at minimal cost
• It is referred to as a rider because it needs a
basic policy to “ride on” to be effective
70
Premiums, Basic Plans & Riders
Types of Riders
71
•
Accidental Death Benefit
•
Waiver of Premium Due to Disability
•
Payor’s Benefit
•
Guaranteed Insurability Option
•
Term Insurance Rider
•
Family Income Rider
Premiums, Basic Plans & Riders
Accidental Death Benefit (ADB)
• Provides an additional amount equal to the
coverage in the event of accidental death of the
insured.
• Limited within the period of 90 days from the
date of the accident.
72
Premiums, Basic Plans & Riders
Waiver of Premium due to Disability (WPD)
• Provides for a waiver of premium if the insured
suffers from a total and permanent disability
73
Premiums, Basic Plans & Riders
Payor’s Benefit
• Provides waiver of premium during the rider term
when the payor dies or becomes totally and
permanently disabled
• Waives premiums until the time the insured child
reaches the age where he can earn and pay for
the premiums of the policy
74
Premiums, Basic Plans & Riders
Guaranteed Insurability Option (GIO)
• Provides an opportunity for people to buy
specific amounts of additional life insurance
coverage at stated future intervals without the
need to show evidence of insurability.
• This means that the insured will automatically
pay the standard rate since there would be
minimal underwriting requirements.
75
Premiums, Basic Plans & Riders
Term Insurance Rider
• Provides an additional amount of coverage for a
minimal cost.
• The rider has its own face amount separate from
the coverage of the basic policy, but cost of
coverage is lesser since it is a term coverage.
76
Premiums, Basic Plans & Riders
Family Income Rider
• A form of decreasing term rider that provides
the family of the insured monthly income from
the insured’s date of death until the duration of
the rider.
77
Legal Aspects of
Life Insurance
Insurance Concepts
March 2015 version
78
Legal Aspects of Life Insurance
Types of Contracts
79
•
Valued Contracts and Contracts of Indemnity
•
Informal and Formal Contracts
•
Unilateral and Bilateral Contracts
•
Aleatory and Commutative Contracts
•
Contracts of Adhesion and Bargaining Contracts
Legal Aspects of Life Insurance
Valued Contract vs. Contract of Indemnity
LIFE INSURANCE
80
NOT LIFE INSURANCE
VALUED CONTRACT
CONTRACT OF
specifies the amount of
benefit that will be payable
when a covered loss occurs,
regardless of the actual
amount that was incurred
INDEMNITY
The amount of policy benefit
payable for a covered loss is
based on the actual amount of
financial loss, as determined
at the time of loss
Legal Aspects of Life Insurance
Informal Contract vs. Formal Contract
LIFE INSURANCE
INFORMAL
FORMALCONTRACT
CONTRACT
-Parties met certain formalities
concerning the form of the
agreement.
-Contract should be written
and should have a seal to be
enforceable
-Parties met requirement
concerning the substance of
the agreement.
-It may be expressed in a
verbal or written fashion.
Life insurance contracts are
typically written.
81
NOT LIFE INSURANCE
Legal Aspects of Life Insurance
Unilateral Contract vs. Bilateral Contract
LIFE INSURANCE
UNILATERAL
CONTRACT
Only one of the parties
(insurer) to the contract has
legally enforceable promises
82
NOT LIFE INSURANCE
BILATERAL
CONTRACT
Both parties to the contract
have legally enforceable
promises
Legal Aspects of Life Insurance
Aleatory Contract vs. Commutative Contract
LIFE INSURANCE
ALEATORY
CONTRACT
-One party provides
something of value to
another party in exchange
for a conditional promise
-One party may receive
something of greater value
than that party gave
83
NOT LIFE INSURANCE
COMMUTATIVE
CONTRACT
-is an agreement which the
parties specify in advance the
values that they will
exchange
-parties exchange items or
services of relatively equal
value
Legal Aspects of Life Insurance
Contract of Adhesion vs. Bargaining Contract
LIFE INSURANCE
CONTRACT OF
ADHESION
One party prepares the
contract and the other may
accept or reject as a whole,
without any bargaining
between the parties to the
agreement
84
NOT LIFE INSURANCE
BARGAINING
CONTRACT
Both parties, as equals, set
the terms and conditions of
the contract
Legal Aspects of Life Insurance
Offer and Acceptance
• For a contract to be valid there must be:
An OFFER and ACCEPTANCE
85
Legal Aspects of Life Insurance
Conditional Receipt
• In most cases when an advisor receives the
premium payment from the client, he/she issues
a conditional receipt to acknowledge payment.
86
Legal Aspects of Life Insurance
Legal Capacity
•
Policyowner
o Must be of legal age
o Must have sound mind and body
•
Insurance Company
o Registration and Regulation
o Capitalization
87
Legal Aspects of Life Insurance
•
Insurable Interest
o Insurable Interest exists when a policyowner has
reasonable chance of suffering financial loss if the
person who is insured dies.
o It should also exist between the insured and the
named beneficiaries.
o Its existence during inception of the policy is
required.
88
Legal Aspects of Life Insurance
Every person has an insurable interest in the life and
health:
1. Of himself, of his spouse and of his children;
2. Of any person on whom he depends wholly or in part for
education or support, or in whom he has a pecuniary
interest;
3. Of any person under a legal obligation to him for the
payment of money, or respecting property or services, of
which death or illness might delay or prevent the
performance; and
4. Of any person upon whose life any estate or interest
vested in him depends.
89
Policy Provisions
TRADITIONAL LIFE Insurance Concepts
March 2015 version
90
Policy Provisions
While the insured lives and the policy is active..
o Entire Contract Clause
o Assignment
o Ownership
o Dividend Options
o Premium Payment
o Grace Period
o Policy Loan
91
Policy Provisions
Entire Contract Clause
o Made up of the policy and the
attached application form
o Includes other reports,
amendments material to the
policy
o Cannot be affected by later
changes
92
Policy Provisions
Ownership
o Right to assign, transfer or
have policies amended
o Change beneficiaries and
exercise privileges in the
contract
o Right to cash values and
dividends
93
Policy Provisions
Premium Payment
o Can be done annually,
semi-annually, and quarterly
o Payment of the first premium
makes the contract binding
o Subsequent payments are
entirely dependent on the
policyowner
94
Policy Provisions
Grace Period
o Protects the policy from lapsing
o Generally, 30 days from due date
o Right to cash values and dividends
95
Policy Provisions
Policy Loan
o Right to loan against the cash value
o Loan within prescribed limits; not exceed the
cash value
o Treated as a loan, has interest
96
Policy Provisions
Assignment
o 2 years after the policy has
been in force, the company
cannot contest its validity
o If the company has no
objection during the period,
there can be no question
about the payment of
proceeds
97
Policy Provisions
Dividends
o For participating
policyholders
o Dependent on mortality
experience, investment
earnings and expenses
o NOT GUARANTEED
98
Policy Provisions
Dividend Options
1. Cash
2. Reduced Premium
3. Interest
4. Paid-Up Addition
5. Yearly Renewable Term
99
Policy Provisions
When the insured dies…
o Misstatement of age
o Incontestability
o Suicide
o Beneficiary
o Settlement
100
Policy Provisions
Misstatement of Age
o Misrepresentation on the matter of age
o Age is increased or decreased
o Amount of proceeds will be adjusted upon
death
101
Policy Provisions
Incontestability
o Right of the policyowner to
transfer or assign the policy
o Two types: Absolute and
Collateral
o Must notify the company of
any assignment
o Company will accept without
question
102
Policy Provisions
Suicide
o To discourage financially
desperate people from
purchasing policies with
suicide in mind.
o If committed within 2 years
of the policy, the company
will refund the premiums.
103
Policy Provisions
Beneficiary
o Designated to receive the proceeds of the policy
o Must be identified clearly
o Types of Beneficiary:
 Primary or Secondary (Contingent)
 Revocable or Irrevocable
104
Policy Provisions
Beneficiary
Primary vs. Secondary (Contingent)
 PRIMARY- first person in line to receive the death
proceeds
 SECONDARY (CONTINGENT) - person next in line to
receive the proceeds in case of death of the primary
beneficiary
105
Policy Provisions
Beneficiary
Revocable vs. Irrevocable
 REVOCABLE – changes/amendments to the contract
may take effect without consent. Subject to Estate Tax.
 IRREVOCABLE - changes/amendments to the contract
require written consent. Not subject to Estate Tax.
106
Policy Provisions
Beneficiary
Revocable vs. Irrevocable
Minors are not
recommended to be
named as irrevocable
beneficiaries
107
Policy Provisions
Settlement
o Lump Sum
o Interest Option
o Fixed Period Option
o Fixed Income Option
o Life Income Option
108
Policy Provisions
Settlement
• Lump Sum
o Single sum payment of the
proceeds
• Interest Option
o The company will hold the
proceeds to earn interest
o Interest earnings will be paid out
regularly
109
Policy Provisions
Settlement
• Fixed Period Option
o Pays the beneficiary equal
amounts at regular intervals
over a specified period of years
• Fixed Income Option
o Pays the beneficiary a specified
amount until proceeds are
depleted
110
Policy Provisions
Settlement
• Life Income Option
o Pays the beneficiary regular
income for his lifetime, no matter
how long he lives
111
Policy Provisions
When the insured quits paying his premiums..
o Non-Forfeiture Options
o Reinstatement
112
Policy Provisions
Non-Forfeiture Options
o Cash Surrender Value (CSV)
o Reduced Paid-Up (RPU)
o Extended Term Insurance (ETI)
o Automatic Premium Loan (APL)
113
Policy Provisions
Non-Forfeiture Options
• Cash Surrender Value
o Policyowner claims an immediate cash pay-out for
his policy
o Once elected, policy is terminated
114
Policy Provisions
Cash Surrender Value
Protection Period
30
No more protection
40
100
Quits paying:
 Receive Cash Surrender
Value and Accumulated
Dividends
 Policy terminates
115
Maturity Benefit
= 0.00
Policy Provisions
Non-Forfeiture Options
• Reduced Paid-Up
o Protection continues for life but for a lower face
amount
116
Policy Provisions
Reduced Paid-Up
Protection Period
Protection Period
FA = REDUCED
FA = 1,000,000
30
40
Quits paying:
100
 Same Protection Period
 Reduced Face Amount
117
Maturity Benefit
= REDUCED
Policy Provisions
Non-Forfeiture Options
• Extended Term Insurance
o Protection continues for the same face amount but
only until a certain period of years and days
o Automatic non-forfeiture option
118
Policy Provisions
Extended Term Insurance
Protection Period
Protection Period
FA = 1,000,000
FA = 1,000,000
30
Until a certain
period of Years
and Days
Reduced Protection Period
40
Quits paying:
 Same Face Amount
 New Protection Period
119
Maturity Benefit =
0.00
Policy Provisions
Non-Forfeiture Options
• Automatic Premium Loan
o The company lends to the insured an amount from
the cash value to pay for the overdue premiums
o Policy has to have a sufficient amount of cash value
120
Policy Provisions
Automatic Premium Loan
• if cash value is sufficient, automatic payment
will be applied on the premium due
• it will be considered as policy loan
Cash Vaue
30
40
41
missed the 30-day grace period:
• SAME protection period
• COVERAGE : Face Amount
less loan (unpaid due)
121
100
Maturity Benefit = less
any unpaid dues with
interest
Policy Provisions
Reinstatement
o Pure Reinstatement
o Redating
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Policy Provisions
Reinstatement
• Pure Reinstatement
o Pays back all past due premiums plus interest
o proof of insurability is necessary
123
Policy Provisions
Reinstatement
• Redating
o New premium would be charged
o Based on new attained age
o New policy effectivity date
124
Annuities
Insurance Concepts
March 2015 version
125
Annuities
Annuities
o Not a life insurance policy
o Purchase of income
o Liquidation of both capital
and interest
126
Annuities
So how are annuities different from life
insurance contracts?
127
Annuities
LIFE INSURANCE
Estate Creation
Premiums
mostly in
installments
Beneficiary or
Insured
Death of the Insured
or at the Maturity of
the Policy
128
ANNUITY
NATURE
Estate Distribution
PAYMENT
Purchase price
mostly paid in
lump sum
RECIPIENT
PAYMENT
OF
PROCEEDS
Annuitant or
Successor
While the annuitant
is still alive or until a
specified period
Annuities
Types of Annuities
• Fixed
o Single Premium Immediate
o Single Premium Deferred
o Installment Deferred
• Variable
o Conventional Variable
o Deferred Variable
129
Annuities
Fixed Annuities
• Single Premium Immediate
o Entire premium is deposited in the annuity fund at
one time
o Income begins immediately
130
Annuities
Fixed Annuities
• Single Premium Deferred
o Annuity fund is purchased through a single payment
o Income begins years after the payment is made
131
Annuities
Fixed Annuities
• Installment Deferred
o Provides pension for life; no life insurance coverage
o Fund is built up through a series of regular
payments
132
Annuities
Variable Annuities
• Conventional
o Based on fixed-dollar investments
o Specified interest and maturity values
133
Annuities
Variable Annuities
• Deferred
o Period of time lets the funds accumulate
o Value may rise and fall depending on the investment
results
134
Annuities
Annuity Settlement
o Life Annuity
o Cash Refund Annuity
o Installment Refund Annuity
o Period Certain Annuity
o Joint and Full Survivor
Annuity
135
Annuities
Annuity Settlement
• Life Annuity
o Provides a series of periodic
payments to the annuitant
o Payment for the rest of his life
136
Annuities
Annuity Settlement
• Cash Refund Annuity
o If annuitant dies, the beneficiary will
receive cash payment equal to
annuity fund
o Cash payment will be less the
amount already paid out
137
Annuities
Annuity Settlement
• Installment Refund Annuity
o If annuitant dies, the beneficiary
will receive the same monthly
income
o Installments will be paid until
annuity fund is exhausted
138
Annuities
Annuity Settlement
• Joint and Full Survivor Annuity
o Income that is paid out to the annuitant and the
beneficiary
o If either dies, the same income continues to the
survivor for life
o When the survivor dies, no further payments are
made to anyone
139
Annuities
Annuity Settlement
• Period Certain Annuity
o if annuitant dies within a specified
period, such as 10 or 20 years,
payments will continue until the
end of the period.
140
Ethics
Insurance Concepts
March 2015 version
141
Ethics
Unethical Practices
o Twisting
o Knocking
o Overloading
o Rebating
o Misrepresentation
142
Ethics
Unethical Practices
• Twisting
o Is persuading the person to lapse or surrender a
policy in order to purchase a new one
o Also called Replacement
143
Ethics
Unethical Practices
• Knocking
o Making derogatory remarks about competing
policies, advisors or companies
144
Ethics
Unethical Practices
• Overloading
o Selling a person insurance more than what is
warranted by his resources
145
Ethics
Unethical Practices
• Rebating
o Offering part of your commission to your client
o Accepting a smaller premium than the one stipulated
in the policy
o Premium discrimination against policyholders
146
Ethics
Unethical Practices
• Misrepresentation
o Misstatement of material facts for insurance
147
Simulated Examination
TRADITIONAL LIFE Insurance Concepts
March 2015 version
148
Test Taking Tips
Insurance Concepts: TRADITIONAL &
March 2015 V.U.L
version
149
Test Taking Strategies
Before the Exam
1. Be prepared, Read and Review.
2. Before the test list everything you will need for it
that is allowed. Like pencils/pens, a watch, etc.
3. Review your Traditional Life Simulated Exam and
Reviewer.
150
Test Taking Strategies
During the Exam
1. Read the directions carefully.
2. Get the big picture.
3. Answer easy questions first.
4. Eliminate answers to difficult questions
5. Review your test to make sure that you have
answered all questions.
151
THANK YOU!
&
GOD BLESS YOU!
152