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Agent's Licensing Course 1

Agents Licensing Course

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What is the ALC?

3-day program covering insuranceconcepts, designed to equip participants withthe knowledge to become a successful FinancialAdvisor

Attendance is IMPORTANT to get a trainingcertification

You need to PASS the licensing examinationgiven by the Insurance Commission or IIAP

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Exam Requirements

Application for examination Insurance Commission (IC) Insurance Institute for Asia and Pacific (IIAP)

Certification of Training (for IC) Certification of Good Moral Character (for IC) 3pcs. (for IC)/2pcs. (for ATS) 1x1 picture (w/ whitebackground, corporate attire) Exam Fee P500

Schedule:Insurance Commission, UN AvenueTuesday to Friday 8:00-9:00 am, 9:00-10:00 am

IIAP, 26th Flr. Ayala FGU Bldg.Saturday 8:00-9:00 am, 9:00-10:00 am

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Foundations of Life Insurance

Module 1 :

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Sources of Income

Man at WorkMoney at Work

Donations/Charity

What is INCOME?Income is the recurrent flow of cash in exchange forservice rendered or goods manufactured.

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Lifes risks


Man at Work

Die toosoon

Bedisabled

Live toolong

HUMAN ECONOMIC VALUE- Measured by what man has been able toaccumulate (assets) and what he can reasonablyexpect in the future (future earnings).

- Economic value of man to his Family

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Purpose of Life Insurance


Die toosoon

Bedisabled

Live toolong

Insures the continuance of INCOMEdespite LIFE RISKS

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Life insurance

Is a device by which a largenumber of people protect

themselves againsteconomic losses due toDEATH, DISABILITY

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Risk sharing

It is shared by a group of people,Cooperative Risk Sharing.

Economic loss is spread over a large numberof people.* Everybody is willing to accept a small loss inpreparation for a greater loss.

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Types of risks

SPECULATIVE RISK PURE RISKA risk with possibility of gain(i.e. gambling and business)

A risk with no possibility of gain(i.e. death, disability and old age)

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Clean- up FundA fund to liquidate burial

expenses, outstanding personal loans

and last illness expenses.

Life Income for the widow Education Fund Retirement Fund Emergency Fund Planned Insurance Estate

How life insurance works

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How life insurance works

Insurance contributes to the welfare of thecountry by: Accumulating capital for

investment and commerce Partially relieving the community

of the care of dependents Encouraging provisions for the

future

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1Agent's Licensing Course 13

Tools in insurance

1. Principle of Large NumbersA theory of probability that states that the

more times a particular event is observed,

the more likely it is that the observed

results will approximate the trueprobability that the event will occur.

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Tools in insurance

ge Males emales ge Males emales65

66

67

68

69

14.248

15.761

17.467

19.373

21.486

8.241

9.114

10.012

10.931

11.916

70

71

72

73

74

23.810

26.353

29.120

32.123

35.398

13.027

14.326

15.872

17.717

19.883

2. Mortality tableCharts that display the incidence of death, by age, among

a given group of people

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Tools in insurance

3. Life expectancyNumber of years that persons will live on the average

as shown by the mortality table.

(Females have longer life expectancy than males)

5565

75LIFE LINE

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Tools in insurance

4. Law of ProbabilityHelps us estimate or predict the chances that a person

will still be alive after a given number of years.

Life is a game

of CHANCE

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Life insurance terms

INSUREDPerson whose life is

covered by insurance

BENEFICIARYPerson who will receive the faceamount when the insured dies

FACE AMOUNTMoney which the insurancecompany will provide when the

insured dies

PREMIUMPayment or one of a

series of payments madeby the insured to makethe policy inforce and to

keep it inforce

POLICYWritten contract between the

insured and the insurancecompany

INSURER

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Definition of premium

P8,000

The consideration given by the insured inexchange for the promise of the insurer topay a stipulated amount in the event of a

claim or upon maturity of thelife insurance contract.

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Definition of actuary

1

The person who makes the necessaryassumptions and calculations with

respect to the principal elements in alife insurance premium.

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How premiums are determined

a. Ageb. Type of Planc. Ridersd. Amount of Coverage (we allow change in coverage as

long as proof of insurability is sufficed)e. Sexf. Policy Fee (Fixed amount added to premiums regardless

of policy size)

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1. MortalityRelative incidence of death among a given people.

2. InterestEarnings from invested premiums

3. Safety Margin RequirementMoney set aside by the insurance company to meet

adverse claims

4. Operating Expenses/LoadingOverhead expenses

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Mortality

Interest andsafety margin

Net premiumLoading orOperatingcost

Gross Premium is equal to+

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Types of premiums

Age

Premium

Level premium

Single PremiumOnly one premium is required

Natural PremiumPremium that increases with age

Level PremiumPremium that is level throughout the paying period

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Types of premiums

Graduated PremiumPremium that increases every year until 5 th year then remains on that level throughout

the duration of the premium paying period

Modified PremiumPremium that increases only on the 5th year of the policy then remains on that level

throughout the duration of the premium paying period

2,5002,700

3,0003,200

3,500

3,200

3,500

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Types of premiums

Fractional PremiumProportionate share of the annual premium (i.e. semi-annual, quarterly)

AnnualPremium X ConversionFactor = Modal PremiumDesired

Formula:

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Premium receipt

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Binding Premium ReceiptA type of initial premium receipt that makes insurance coverage effective

immediately but only until the insurance company either rejects the

application or approve it and issues a policy

Initial Premium

Conditional Premium ReceiptEffectivity

Conditional Premium ReceiptTerminates

Policy Approval & Issuance

Binding Premium Receipt

Terminates

Policy Approval & IssuanceInitial Premium

Binding Premium Receipt

Effectivity

Conditional Premium ReceiptA type of premium receipt given when the applicant pays the initial

premium and under which the life insurance will become effective before a

policy is issued only if the proposed insured is found to be insurable

Binds the insurer unconditionally to pay the benefits of the plan If the applicant will die before issuing the policy, the insurer will pay the benefit whether or not the policy would have been issued

If the applicant will die before issuing the policy, the insurer will pay the benefit only if the policy would have been issued

Pays Death

Benefit

(no questions asked)

Pays Death

Benefit

(with conditions)

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Reserves


The sum of money which will enablethe company to pay all of its policy

claims or maturity.

RESERVESclaims claims

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Types of reserves


Legal ReserveA fund set up by insurance company, as required by law to the

claims that may arise.

Policy ReserveThe proportionate share of the policy to the legal reserve

Contingency ReserveA fund set up by the insurance company from the surplus to meet

unexpected and unfavorable claims that may arise

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Basic Plans

Module 2 :

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P li i d t li

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Policies accdg. to line

INDIVIDUALIssued to individual

applicants

GROUPSeveral individuals

are insured under one

master policy

INDUSTRIALPremiums are

payable

daily, weekly or

monthly

UNIVERSAL LIFECoverage can vary depending

upon the amount of premium

and investment performance

of the insurance company

(stocks, bonds, etc.)


P li i d t t f l

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Policies accdg. to type of plan


Cost

Cost

PERMANENTOffers protection & savings (cash values &

dividends)

a. Whole life planb. Limited-pay whole life planc. Endowment plan

TEMPORARYOffers purely protection (Term Plan), Maximum

coverage at the least amount of initial

premiums

a. Renewableb. Convertiblec. Renewable & Convertible

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Permanent plan


a. Ordinary/ Straight PayPayment is up to age 100.

Premium Paying Period

Protection Period

Age 100PED

Permanent policy that covers an individual up to age 100. Ithas low level of savings and matures at age 100.

A. Whole life plan

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P t l

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Permanent plan


b. Limited PayPayment is for a limited period only.

Ex. 5pay, 10pay, life paid-up at 65


Protection Period

Age 100PED Limited Period

A. Whole life plan

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Permanent plan

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Permanent plan


c. Universal LifeA variation of whole-life policy where premiums and benefits are flexible

due to the performance of its investment fund (real estate or stock

fund).


Protection Period

Age 100PED Limited Period

A. Whole life plan

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Permanent plan

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Permanent plan


Permanent policy that cover a person and mature after a

specified period. It is actually a level term and a pure

endowment.

a. Age- basedEndowment that matures at a stated age.

Ex. Endowment @ age 65


Protection Period

Age 100PED Age 65

B. Endowment plan

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Permanent plan

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Permanent plan


b. Term- basedEndowment that matures at a specified period.

Ex. 20yr endowment, 15yr endowment


Protection Period

Age 100PED 20th yr

B. Endowment plan

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Temporary plan

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Temporary plan


a. Level TermFace amount and premiums remain constant.


Protection Period

Specified PeriodPED

Term plan

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Temporary plan


Term planb. Decreasing TermFace amount decreases by a stipulated amount over a period of time.

This plan is usually used for mortgage redemption & loans.

Sum Assured


Protection Period

Specified Period

500K 400K 300K 200K 100K

PED

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Temporary plan

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Temporary plan


Features of Term Plana. RenewabilityTerm policies may be renewed for the same number of years before the

term ends, even without evidence of insurability.


Protection Period

5 yr Term 5 yr Term


Protection Period


Protection Period

5 yr TermPED

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Temporary plan

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Temporary plan


Features of Term Planb. ConvertibilityTerm policies may be converted to a permanent policy before the

term ends, even without evidence of insurability.


Protection Period


Protection Period

Specified Period Age 100PED

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Policies accdg to surplus distribution

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Policies accdg. to surplus distribution


ParticipatingA type of policy wherein the policyholder receive policy

dividends.

Non-ParticipatingA type of policy wherein the policyholder does not receive

policy dividends.

DIVIDENDS are divisible surplus earnings of thecompany, which are distributed equally to the

insured

Cost

Cost

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Dividend options

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Dividend options


1. Cash paymentGet the dividends as they fall due or when it becomes payable

2. Premium reductionDividends are used to pay future premiums

3. Accumulate at interestLeave the interest with the company to earn a specified rate of interest

4. Buy paid-up additionDividends are used to buy additional small paid-up coverages of the

same plan

5. Buy a renewable term insuranceDividends are used to buy a yearly renewable term equal to the premium

paid or cash value

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Supplementary ContractsRIDERS

Module 3 :

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What are riders?

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What are riders?

They are supplementary contracts that provides

additional benefits for a minimal cost. They need a basic

plan to be attached to, thats why theyre called riders.

They are term insurance because they are applicable onlyfor a limited period. They may be inforced only until age

60 of the insured.


Riders

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Riders


A. Waiver of Premium due to DisabilityStops further premium payments in the event of:

A. Total Disability &

B. Permanent Disability (waiting period)


Protection Period

Age 100PED

Future Premiums waived up to age 60

Riders

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Riders


B. Payors Benefit/ Clause


Protection Period

Age 100PED

Future Premiums waived up to age 60Or until the child turns 21 which ever comes first

Stops further premium payments in the event of Payors:

(Ex. Juvenile Policies)

A. Death or

B. Total & Permanent Disability

Riders

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Riders


Provides additional benefit if cause of death was due to

accident. (Ex. Automobile Accidents)

Basic Policy + ADB = Total Death BenefitP100,000 + P100,000 = P200,000

Illustration:

C. Accidental Death Benefit/ Double Indemnity

CONDITIONS: Death must occur within 90 days from the time of accident

Death must occur before termination of the rider at age 60 Death is solely and directly due to accident, independent of other causes

Riders

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Riders


It is basically a term plan attached to a permanent plan (Ex. 5 yr

Term : P500K)

Provides greater coverage for the least amount of premiums

Common type is the Family Income Rider, which is a decreasing

term.

D. Term rider

Basic Policy + Term Rider = Total Death BenefitP100,000 + P500,000 = P600,000

Illustration:

Riders

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Riders


It allows purchase of additional policies without evidence of

insurability

E. Guaranteed insurability rider

Rider limitations

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Rider limitations


They expire at a specified period. They cease when cash values are used as premiums. They do not accumulate cash values. They can only be purchased before a stated age. They do not take effect if specified conditions are not

met.Note: Dividends are unaffected if riders take effect.

(Ex: Even if premiums are waived by WPD/ PB)

How do I recommend products?

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p


Advisors are expected to make aTOTAL NEEDS SELLING

which is to determine a prospectscomplete financial need preparatory to

offering a product

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Risk Selection

Module 4 :


Risk selection

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What is Underwriting? It is the process of Risk Appraisal.

- Risk in Insurance is Hazards on

peoples lives.

It is done to prevent Anti- Selection.Anti-selectionThe tendency of persons with health

impairments or hazardous occupations to apply

for life insurance


Underwriting factors

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g


P physicalO occupationalF financialM moralA avocation and hazardous pursuitsR residence and travel

Physical

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y


Age Built Physical Condition Personal Medical History Family History

Occupational

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p


Classification of occupation: Accident Hazard Unhealthy working conditions Social class hazard

Source of income to pay for premiums. Some occupations may cause injury, disability and even

death (ex. Black Jack dealer, Barter Trader) Premiums may be adjusted to include occupational

rating.

Financial

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Can client pay for hispremiums?

Advisors must ask for all sources of income: Part-time job Harvest from land Rentals Others

Moral

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Infidelity of the spouse Chain smoker Alcoholic Drug addict Gambler

Any immoral conduct involves extra mortality

Avocation/hobby

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Mountain climbing Scuba diving Parachuting Sky diving Car racing, motorcycle racing

Hazardous avocations or hobbies post extra risk onthe persons life and would necessitate payment ofextra premium

Residence and travel

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Living condition, peace andorder situation may increaselifes risks

Sources of information

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Where can we get information on prospects age, healthcondition, occupation, avocation, etc.?

1. Agent2. Application Form3. Medical Examiner4. Attending Physician5. Inspection Report6. Financial Report7. Medical Information Bureau

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MEDICAL EXAMINER Physical examination conducted to establish health

condition and history.ATTENDING PHYSICIAN Confirmation from a doctor that applicant has fully

recovered from a previous illness. It should always befurnished if available. Date of Illness Doctors Name and hospital Diagnosis and

treatment, Duration of Illness, Date of relapse or recurrence (ifany)


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INSPECTION REPORT Third party person/company hired to gather additional

information about the prospect.

FINANCIAL REPORT Documents supporting the clients capability to pay and

sustain payment of premiums i.e. Income TaxReturn, Annual Statement


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MEDICAL INFORMATION BUREAU Source of confidential medical information on

applicants for insurance

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What are liens?

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It is a limitation in coverage because of higher riskexposure of the insurer. Juvenile Lien

Pertains to insured children below 6 years old Pregnancy LienPertains to pregnant women applying for insurance Aviation Lien

Civilian or members of AFP engaged in flying may be subject to extrarating or lien

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Legal Aspects

Module 5 :

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What is a life insurance contract?

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A contract whereby a party, for a considerationagrees to pay another a certain sum of money in the

event of the latters death from any cause notexcepted in the contract, or upon surviving a

specified period of time or otherwise contingent of

the continuance or cessation of life.( Sec. 179 PD 612)

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Who are parties to a contract?1. INSURER

A corporation who holds a certificate of authority from the InsuranceCommission to issue insurance policiesa. FOREIGN incorporated under foreign laws and whose

respective home office is located outside of the Philippines

b. DOMESTIC incorporated under Philippine laws and whoserespective home office is located within the Philippines

Types:1. Stock derive capitalization from sale of stocks. The owners are

stockholders.

2. Mutual Owned by policyowners. The dividends that are realized by thecompany go to the policyowners.

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Who are parties to a contract?2. INSURED/OWNER

Legally qualified to enter into a contract 18 years old andabove, with sound mind

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Who can represent the insurer?

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INSURANCE AGENTAny person who for compensation, solicits or obtains an insurance onbehalf of any insurance company

INSURANCE BROKERAny person who aids in soliciting or negotiating the making of anyinsurance contract or in placing risk on behalf of an insured otherthan himself.

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Characteristics of a life insurancecontract?

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A LIFE INSURANCE contract is a. Unilateral Contract

Only one party (the insurer) makes a legally enforceable promise. Aleatory Contract

Values exchanged(premiums Vs. Benefits) are not necessarily equal.The insured may receive more than what he has given. Contract of Adhesion

The terms and conditions of the contract are drafted only by one party(the insurer).

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Characteristics of a life insurancecontract?

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A LIFE INSURANCE contract is a. Conditional Contract

The insurers obligations and promises describe in the contract aresubject to certain conditions (i.e. exclusions, liens).

Contract of Utmost Good FaithEach party must depend on the utmost good faith of the otherconcerning the risk to be transferred.

Valued ContractAn agreement to pay a given amount on the occurrence of a statedcontingency or survival after a specified period. No indemnity isattempted because nobody can place a monetary value on life.

Elements of a contract

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ObligationThe insurer is obliged to pay the proceeds if all conditions in thecontract have been met by the insured.

ConsiderationThe sum of money given by the insured as a consideration for theinsurers promise to pay in the event of a contingency or after aspecified period.


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ContingenciesThe contingencies in a life insurance contract are DEATH, OLD AGEand DISABILITY.

Legal PurposeLife insurance as a contract affect public interest. Therefore, theobject or legal purpose of the contract must be in accordance withthe provisions of the law.


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Mutual ConsentBoth parties agreed to enter into a contract, accepting each othersrights, limitations and obligations as specified in the policy.

Insurable InterestIs the relationship that exist where one suffers (financially) in thedestruction of the other, or continually gains from the existence ofthe other.

Who may receive the benefits of acontract?

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The beneficiary (ies) named in the contract.Anyone who has insurable interest on the life of another can be a beneficiary.

It exists when one is reasonably dependent on the other during the inception

of the policy.

Everyone has insurable interest in his own life By virtue of blood or marriage Where there is economic loss upon the death of the

insured A finance company on the life of the borrower

Any person with pecuniary interest has insurable interest.

Who are not qualified to be namedbeneficiary?

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Under Article 739 ( Article 2012 civil Code ) of the New Civil Code provides

that the following persons are prohibited from receiving any donations andthus cannot be named as beneficiaries.

Those made between persons who were guilty ofadultery or concubinage at the time of thedonation; (i.e.common-law wife)

Those made between persons found guilty of thesame criminal offense; (i.e. public enemies)

Those made to a public officer or his wife,descendants or ascendants by reason of hisoffice.

Beneficiary

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According to priority: PRIMARY

Has priority over the death proceeds of the policy SECONDARY/CONTINGENT

The beneficiary who will receive the death proceeds if theprimary beneficiary (ies) predeceases the insured and no otherprimary beneficiary is named

ESTATEBecomes the beneficiary if there are no persons named asbeneficiaries or if there are no more living primary norcontingent beneficiaries

Beneficiary

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According to right: REVOCABLE

A beneficiary whose right in the policy are subject to theinsureds reserved right to change or add more beneficiaries orto do anything else with the policy even without the beneficiarysconsent.

IRREVOCABLEA beneficiary who has VESTED right to the proceeds of the policyand therefore, the policyowner cannot exercise his rights over thepolicy without the WRITTEN CONSENT of his beneficiary.

Taxes in insurance

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ESTATE TAXTax levied on the transfer ofownership from the deceasedproperty owner to his heirs.The death proceeds beingsubject to ESTATE TAXdepends on the BENEFICIARYdesignation.

Taxes in insurance

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ESTATE TAXWhen the beneficiaries receive the deathproceeds, it is deemed that there was atransfer of ownership for they do notpossess the rights over the policy

Revocable

IrrevocableThey possess the rights over the policy. So it isdeemed that they own the death proceeds andthus when they receive the proceeds there is notransfer of ownership.

Taxes in insurance

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Are all insurable proceeds TAXABLE?It is not subject to income tax, because it is notconsidered as INCOME. But if the proceeds are leftto earn interest, the interest earnings will be deemedas income and therefore taxable.

DEATH PROCEEDS

MATURITY PROCEEDSAny amount in excess of the TOTAL PREMIUMS paid areconsidered income and therefore taxable.

:

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Policy Provisions

Module 6 :


Policy Provisions

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Entire Contract ProvisionMade up of the APPLICATIONFORM, ENDORSEMENT and thePOLICY

Policy Provisions

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EFFECTIVITY OF POLICYWHILE THE INSURED LIVES

The life insurance contract becomes effective only upon:

Approval and delivery of the policy During the lifetime and good health of the

insured Upon payment of the first premium in

advance

Policy Provisions

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GRACE PERIODWHILE THE INSURED LIVES

The company allows a period of at least 30 days from thedue date for the payment of each premium. During thistime, the insurance will continue to be in force. If deathoccurs during the grace period, the company shall be liablefor full amount, less the premium due for the period.

Policy Provisions

WHILE THE INSURED LIVES

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AUTOMATIC PREMIUM LOANProvides that at the end of the graceperiod and the premium due has notbeen paid, an amount equal to thepremium due will be deducted fromthe cash values, to pay the premiumdue.

Policy Provisions


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POLICY LOANA provision that states that at anytime after a cash value isavailable and the policy is in force other than as ExtendedTerm Insurance, the policyowner may obtain a loan for anamount not exceeding the cash value.

Interest is incurred this is to replace investment income There is no definite payment for the loan itself. This should only be resorted to in dire emergency.

Policy Provisions


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ASSIGNMENTIt is defined as the giving of the right to expect to a thirdparty other than the named beneficiary through a dulynotarized Deed of Assignment. Partial or Collateral

Transfer of some right over the policy for a limited period.Ex. Payments of Bank Loans

Absolute or Complete AssignmentThe assignee acquires all the rights and interests of the original policyowner.Ex. Retiring Key Executive, Change of Payor (Estate Conservation)

Policy Provisions

WHEN THE INSURED DIES

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MISSTATEMENT OF AGEIf the age of the insurance has been misstated, theamount of insurance will be adjusted to the amount whichthe premium would have purchased at the correct age,applicable risk class and applicable premium rates as ofthe policy date.Example:Client pays premiums at P45K where in fact it should be P50K at his correct age. Insurance amountis at P500,000. What is the total adjusted DB?FA to be paid = P500,000 (P45,000) = P450,000 (Total DB payable)

50,000

Policy Provisions


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INCONTESTABILITY CLAUSEProvides that the policy and any claims can be contested bythe insurance company on the grounds of materialmisrepresentation or material concealment within 2 yearsfrom the date the policy was issued or reinstated.

Policy Provisions


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SUICIDE CLAUSEProvides that if the insured commitssuicide within 2 years from the date thepolicy was issued or reinstated thecompanys liability is limited to a returnof premiums paid.

Policy Provisions


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SETTLEMENT OPTIONS LUMPSUM total cash proceeds are given INTEREST OPTION proceeds are left with the company for a specified time. The

interest is paid to the beneficiary

FIXED PERIOD OPTION the proceeds plus interest earned shall be paid ininstallments for a specified number of years

FIXED AMOUNT OPTION installments of equal amounts are paid to thebeneficiary, until the proceeds and interest are exhausted

LIFE INCOME proceeds and interest are paid to the beneficiary while he or she livesNote:

Theres no option available for payments to be received when a child reaches independency orupon request.

Policy Provisions


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BENEFICIARYInsurable interest must exist in designating beneficiaries atthe time of application.According to priority: Primary Secondary/ Contingent Estate

According to right: Revocable Irrevocable

Policy Provisions

WHEN THE INSURED QUITS

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LAPSATIONIt happens because. of non-payment of premium loan + interest exceeded the cash value policyholder doesnt value the insurance policy

Policy Provisions


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The truth about lapsed policiesa. Agents loses all future commissions on renewal premiums

b. Deprive agents of substandard bonus opportunities

c. Many lapsed policies can cause an agents license to be cancelled

d. The agent loses a valuable source of prospects

e. A lapsed policy seldom buys again from his former agentf. It is a broken promise to a family

g. A total financial loss to a policyowner

h. To lapse a policy is to deny your dependents food, clothing and shelter

i. When a policy lapses the ex-policyowner loses the right to pay for todays

insurance at yesterdays price

j. Policyowner expects their agents to remind them of their due date.

Policy Provisions


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NON-FORFEITURE OPTIONA provision that provides the policyholder with options tochoose from in the event of premium default, provided thatthere are cash values and/or dividends in the policy. Thisoption will be implemented at the end of the grace period.

Policy Provisions


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NON-FORFEITURE OPTION Cash Surrender

Policyowner surrenders his policy for the cash value

Reduced Paid-up InsuranceCompany takes the cash value in order to buy a paid up policy but a lowered FA

Extended Term InsuranceCompany takes the cash value in order to buy a term insurance with the same FA and

receives pure endowment (if any). This is usually the default option.

Note: Pure endowment are any cash values in excess.

Policy Provisions


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REINSTATEMENTProvides for a revival of a lapsed policy, if the policy hasnot lapsed for more than 3 years, subject to the followingconditions: The policy has not been surrendered for cash or converted toExtended Term Insurance which has expired. Satisfactory proof of insurability of the insured is given to the

company. Payment of all overdue premiums and outstanding indebtedness with

interest in advance equal to 12 compounded annually.

Policy Provisions


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TYPES OF REINSTATEMENTBACK PREMIUM METHODA method wherein all accrued premiums plus overdue interest and current

premium will be paid thereby maintaining the original policy effectivity date.

REDATING METHODA method wherein the policy effectivity date is adjusted to a later date. Thus the

insured no longer needs to pay unpaid premiums but will instead pay the

difference in premium due to the changed in policy effectivity date and the

current adjusted premium.

Module 7 :

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Annuities


What is Annuity?

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AnnuitiesIt is a purchase of Income. The person who buys an annuityis an Annuitant.

Premiums may be paid in lump sum/ singlepayment or installment i.e. annually, semi-annually, quarterly or monthly


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What is Annuity?

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When do annuities commence? IMMEDIATE ANNUITY

Payments start at stated period such as one month, three months, six months or one yearafter the purchase.

IMMEDIATE DEFERRED ANNUITYPayments start at the end of a specified number of years or until the annuitant attains aspecified age or a predetermined date.

Module 8 :

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Health Insurance


What is Health Insurance?

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Provides.. Disability income benefits Accidental death and dismemberment benefit Expense reimbursement benefit

Module 9 :

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Industrial Insurance


What is Industrial Insurance?

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The face amounts are very small Sold by agents who go to the policyholders home

to collect premiums, usually on a weekly or monthlybasis

All industrial life policies have a built in accidentaldeath benefit (granted at no extra cost)

Module 10 :

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Group Insurance


What is Group Insurance?

A group of people covered by life

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insurance under one MASTERCONTRACT issued by the INSURER tothe EMPLOYER

The EMPLOYEES are given a certificateof coverage

It may be non-contributory EMPLOYERS shoulder 100 ofthe premiums or contributory EMPLOYER and EMPLOYEEshares in the premium (usually 70 by the employer, 30 bythe employee)


Provides..

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GROUP LIFE INSURANCE GROUP YEARLY RENEWABLE TERM INSURANCE (GYRT)

It is the most common type of group insurance in Philippines and has the least

initial cash outlay, but premiums tend to increase every time policy is renewed.

GROUP MEDICAL INSURANCE GROUP PERMANENT INSURANCE GROUP CREDITORS LIFE mortgage insurance) GROUP RETIREMENT


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Characteristics of Group Policies: It covers death of employees regardless of cause except for suicide

during the 1 yr or 2 yrs.

Enrollment cards are used instead of application forms.

Every member of the group should be working for a minimum of

30 hours per week.

Certificate of Insurance are issued to the individual members and

1 Master Policy to the representative of the group (employer).

Most group policies are on a yearly renewable basis.


What happens to the Group Insurance if the person is

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out of the Group?It can be converted to an individual policy without evidence of

insurability before a specified period expires through *ConversionPrivilege.

Note:

Group Deposit Administration Policy is a group insurance issued as retirement benefits foremployees but does not have any life coverage. In this way, employers are only maximizing

the investment expertise of Insurance companies.

*Conversion Privilege allows the employee to convert to an individual policy with 31 days

from date or resignation/retirement without proof of insurability

Module 11 :

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Investments inLife Insurance


Sources of income

PREMIUMS INVESTMENTS

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Bonds, Mortgage loans, Stocks, RealEstate

Sources of income

What are BONDS?

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Represent a promise on the part ofits ISSUER to repay the borrowed sumof money (the principal) to the

BONDHOLDER (the investor) at astated time in the future

(the maturitydate) and to pay interest to the

bondholder at a specified rate

(interest).

Sources of income

What are MORTGAGE LOANS?

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Is a legal instrument under which the

property pledged can be claimed by the

lender if the borrower cannot repay the

loan on the due date.

Note:Loanable value is 70 of market value

Sources of income

What are STOCKS?

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Certificate of ownership of a company

Common stockholder Has voting rights

Share in the profits

Share in the distribution of assets upon liquidation

Preferred stockholder No voting rights

First priority in dividends & distribution of assets upon liquidation

Sources of income

What are REAL ESTATE?

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Buys or builds properties

Acquires real estate through

foreclosure of properties or

mortgage

Module 12 :

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Code of Ethics/ IC Rules


Capitalization requirements

Capitalization requirement

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P100M, P75MPaid-up and P25M for surplus

Reserve requirement Company loan

Must not exceed 70% of market value of such

real estate

Margin of solvencyMust not be less than P500,000

When is the public interest served?

Supervision of Insurance Industry by the Insurance

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p y y

Commission

If an agent develops a large number of satisfied

clients

If a company insists upon its agents working to high

standards of performance and integrity

When is the clients interest served?

Observes the golden rule in conducting a sale.

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g g

Does not recommend a plan because it has the

highest commission rate

Does a complete Needs Analysis before offering a

plan

Maintains a Fiduciary Relationship such as with aBroker and a Potential Investor

When is the agents license issued?

It will only be issued if applicant has all of the ff:

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Clean record of employment Reasonable educational background

Prospective character and reputation

Passed the licensing examinations

will be renewed if information in the application for renewal

are complete and all requirements are met, and will be

revoked for fraudulent practices, violation of the insurance

code, misrepresentation in the application for license, and

influencing a client to misstate true health.

An agent is committing a criminaloffense:

Upon issuance of receipt and subsequent failure to remit

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such premium collection to the company. Issuance of a receipt for a premium that was not in fact

collected.

Issuance of an ante-dated receipt for a late payment.

Delivery of a policy and collection of an initial premium

with the knowledge that the applicant is no longer in

good health.

An agent is doing an unethicalpractice:

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Rebating/ Premium DiscriminationGiving of commissions (partial or full) to clients is in violation of thelaw. Agent can only share their commission to another agent.

TwistingInducing a client to lapse, forfeit, surrender a policy for the

replacement of a new policy from another company. It is an offense in

the great majority of cases.


Knocking

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Making derogatory remarks against competitors.

OverloadingSelling more insurance than what is warranted by a clients resources.

AlterationAltering an application without the written approval of the applicant


Misrepresentation

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Giving false or misleading statements about theproduct, company, services, and himself (credentials).

Material concealmentConsidered to be material if the insurance company would have altered

its risk appraisal decision had the truth been known

Facts that agents should know

Orphan Policyowners are good source of prospects and newsales.

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Quality Business are policies which are persistent anddemonstrate good mortality experience.

Conservation of Life Insurance Policy is dependent on thequality of agents prospecting habits, the use of effective needsselling, agents service oriented attitude and pressure selling.

Record Keeping is essential for agents who sell all life and healthinsurance.

Facts that agents should know

Repeat Business

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is one of the best source of qualityprospects

is a good agents reward for

conscientious service to his clients

is a recognized characteristic of a

good agent is more persistent than quality business

generally develops larger sales and hence, larger

commissions

requires less selling effort and registers better closing ratios

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Agents Licensing Course

Version 10/17/11