ODDS MEDICAL EXAM REPORT – this is accredited Medical Examiner.

O – stands for Old Age. AGENT’S CONFIDENTIAL REPORT – this is accomplished by the
D – stands for Death advisor, answering the question pertaining to the applicant to
D – stands for Disability provide the additional information.
S – stands for Sickness
RISK CLASSIFICATION
Risk Sharing – is a system design to protect the people against
financial hardship in the event of a loss. This is done when a group of STANDARD RISK - The applicant may be classified as Standard Rate.
people places a fund together in preparation for an uncertain event. This is used to describe individuals whose life expectancies or
Everyone is prepared to accept a small loss to compensate the mortality are regarded as average.
unfortunate from the effect of a larger loss. Thus, life insurance is a
RISK-SHARING BUSINESS. SUBSTANDARD (RATED) RISK - In the case of applicants with higher
than average chance of dying prematurely due to varying degrees of
Types of Risk impairments or due to occupational or medical findings, they may
still be allowed to purchase life insurance but as a Substandard or
Rated risk. Applicants who fall under this category will be charged
1.) SPECULATIVE RISK – is a risk that involves three possible higher-than-usual premium rates.
outcomes: Loss, Gain or No Change. An example of a
speculative risk is gambling. DECLINED - There is also a possibility that the person applying for life
2.) PURE RISK – is a risk that involves no possibility of gain. insurance is not acceptable or uninsurable. This may be due to
There is either a loss or none at all. extremely poor health or an extremely hazardous occupation or
avocation. In these cases, the application is Declined.

LAW OF PROBABILITY, LAW OF LARGE NUMBERS COMMON TERMS

LAW OF PROBABILITY – shows the likelihood that a given event will What is a life insurance contract?
occur in the future. This is used in determining the number of people
dying and living at a particular age within the given period.. The Life Insurance Policy as define by Presidential Decree
1460, also known as the Insurance Code, is a contract whereby a
LAW OF LARGE NUMBERS – states that the more frequent a party for a consideration, agrees to pay another a sum of money in
particular event is observed, the more likely that the observed results the event of his death from any cause not excepted in the contract,
will approximate the true probability of the event happening. or upon surviving a specified period or otherwise in the continuance
or cessation of life.
FACTORS IN RISK SELECTION (POFMAR)
This means that Life Insurance is a contract with two parties,
P – stands for Physical or the person’s health condition the insured and the insurer. The consideration is the premium or the
O – stands for Occupation payment . The sum of money is the face amount or face value of the
F – stands for Financial or the individual’s financial status policy to be given upon the cessation of life which is death or the
M – stands for Moral. This includes lifestyle choices or habit survival up to a specified period.
A – stands for Avocation. Refers to the hobbies that may also present
certain risk. INSURER – the company providing insurance protection, which in this
R – stands for Residence or Travel case, is Sun Life Financial.

UNDERWRITING POLICYOWNER – the person who is buying life insurance.

INSURED – the policyowner can also be the insured, or the person
1.) It begins with the Field Underwriter, usually an advisor or
whose life is insured under the life insurance policy. There are some
agent of a life insurance company. The duty of the advisor is
instances that the insured is different from the policyowner. In the
to observe the applicant for any physical signs of disease and
case of a juvenile policy, wherein the parent is buying the policy,
ask questions from the Application Form. In most life
assuming the role of the owner, on the life of the child who will be
insurance Application Forms, the largest amount of data
named as the insured.
requested relates to the insurability of the applicant.
2.) The second stage is done by an accredited Medical
ORPHAN POLICYOWNER – whose original advisor has retired or is no
Examiner.
longer active. In this case, another advisor may serve as a servicing
3.) The last stage is done by the Head Office Underwriter. Life
advisor upon completion of the necessary forms. It is important to
insurance companies usually have an Underwriting
note that orphan policyowners are good sources of prospect and new
Department to carry out this last stage.
sales.
SOURCES OF INFORMATION
BENEFICIARY – is the person who is designated by the terms of the
APPLICATION FORM – this is filled out with the details of the policy to receive the policy proceeds upon death of the insured.
applicant.
FACE AMOUNT – or Face Value as some call it, is the amount stated PREMIUMS
in the policy as payable if the insured dies while the policy is in force.
This is the basically the amount of insurance provided by the terms To ensure the that the Policyowner receives the protection
of the contract. provided by the insurance policy, the initial premiums must be paid.
This puts the policy in force. Keeping it in force is contingent on the
PREMIUM – is a sum of money given by the insured as the legal payment of subsequent premiums.
consideration for the insurer’s promise to indemnify or replace the
loss. This is the amount of money that must be regularly paid to put Subsequent premiums are also called renewal premiums.
the insurance in force and keep it in force. These may be paid on the Annual, Semi-Annual, Quarterly or in some
cases Monthly modes. However, since interest is lost by not having
DEATH BENEFIT – is the amount payable upon the death of the the full premium in advance the total of 12 monthly premiums, 4
insured. It is the sum assured the beneficiary would receive in case quarterly premiums or 2 semi-annual premiums are higher than that
the insured dies during the protection period of the policy . It is of the annual premium.
usually equal to the face amount of the policy, plus any conditions
payable upon death, less any loans and interest taken on the policy. BASIC FACTOR THAT AFFECT PREMIUMS
After the death benefit is paid, the policy terminates.
MORTALITY – life insurance is based on the accurate prediction of
LIEN – this is done when the death benefit of a policy is restricted in mortality and this is what we call the mortality factor. Through the
amount during the early years of the policy. use of Mortality tables which are firmly rooted in the Law of
Large Numbers and Law of Probability. Life insurance companies
MATURITY – is the time when the policy proceeds of the Face project mortality or life expectancy of an individual, the general rule
Amount are paid, if the insured has survived the maturity period or is the higher the age, the lower the life expectancy. This affects the
date of the policy contract. These proceeds are called the MATURITY premiums in such a way that higher age usually means higher
BENEFIT. After the maturity benefit is paid, the policy terminates. premiums.

CASH VALUES – are the guaranteed amount received in case the plan In developing a life insurance policy, the insurer also must
is terminated or surrendered prior to the death of the insured. This is accumulate from premium payments a fund required to meet the
called the Living Benefit. Part of the cash values may also be taken contract obligations. This fund is called policy reserves.
out as a loanable amount. These are the legal reserves or savings
element of a policy. A policy generally acquires cash values after the INTEREST – when a premium is paid, it is combined with other
payment of three consecutive annual premiums. premiums and it is invested to earn interest. Since the company
expects to earn this interest, it passes this along to the policyowner
DIVIDENDS – are a return of excess premium paid annually to the thus reducing the premium.
owner of a participating insurance policy based on the insurer’s
performance and experience over a given year. EXPENSE – there are number of operating expenses involved in the
CREFALEER – the benefits offered by a Life Insurance Policy business of life insurance, Office Space, Utilities, Administrative
Costs, Sales Contests, Promo’s and Marketing Expenses, Salaries of
C – is for Clean-up Fund. Life insurance can be used as a fund to pay employees, Commissions of advisors and the like. Thus non-
for hospital bills, funeral expenses, and taxes which become due productive advisors in a company can negatively affect the Expense
upon the death of the insured. component of the premium.

RE – is for Readjustment Fund. Life Insurance can be used as a fund Each individual premium has to carry a small portion of
to cushion immediate lifestyle adjustment that the family must make these normal costs so that the factor of expense is computed and
if the insured dies. built into the policyowner’s premium rate. The expense factor is also
called loading. In some cases companies add a safety margin
FA – is for Family Dependency Income. Life insurance can be used to requirement to the expense factor to handle uncommon events that
create a fund to provide for the family’s needs during the critical may increase mortality experience such as natural disasters or
years or critical period when the children are still dependent. calamities.

L – is for Life Income for Widow. Life Insurance can be used as a GROSS PREMIUMS vs NET PREMIUMS
lifetime fund for the widow.
The Premiums to be charged are then computed using the
E – is for Educational Fund. Insurance can be used to ensure the statistics related to mortality, the interest rates on investments and
education of the children even if the breadwinner is taken out of the the projected costs of expenses using Actuarial Science by Actuaries
picture. involved in the development of Insurance Products and computations
of premium rates.
E – is for Emergency Fund. Life Insurance is designed to provide the
financial backup for unexpected circumstances. From the different factors Actuaries compute the Net
Premium, which is equal to Mortality plus Interest. From the Net
R – is for Retirement Income. Life Insurance gives security and peace Premium Actuaries can derive the Gross Premium, by adding the net
of mind for those who have outlived their earning years. premium plus the expense, which may include other factors such as
the safety margin requirement. This Gross premium is the amount of
money charged to the applicant. Permanent plans use the level premium system, which
means the premiums do not increase over time but remain at the
TYPES OF PREMIUMS same level for which it was purchased at inception. This enables
permanent plans, specifically Whole Life Plans to offer protection at
NATURAL PREMIUMS – are premiums which increase yearly with the the least annual cost over the period of protection.
rising rate of mortality. If insurance is to continue, it must be
renewed every year, this type of premium may be relatively Types of Permanent Plans include Whole Life Plans and
inexpensive at the onset however the mortality in later years results Endowment Plans
in very high premiums.
WHOLE LIFE PLAN & LIMITED PAY PLAN – the most basic form of
LEVEL PREMIUMS – on the other hand remain at a constant level permanent life insurance is the Whole Life or Ordinary Policy. It has
from the beginning to the end of the policy in effect for a number of three distinguish characteristics:
years.
Life insurance protection, it provides protection up to age 100.
BASIC PLANS Life insurance premium payment, premiums are payable up to age
100
NATURE Maturity at age 100, the cash values equal the face amount at age
PARTICIPATION 100 making the maturity benefit available.
COVERAGE
ENDOWMENT PLAN – are ideal for those who want their life
NATURE insurance cash values to grow very rapidly to build a fund that will be
available at a certain time for a definite purpose – retirement, for
TEMPORARY OR TERM PLAN – more commonly known as Term example, or at a time child enters college or when an obligation
insurance provides protection only as death benefit. It does not offer becomes due.
living benefits because it has no savings or cash values.
Endowment policies provide protection in the form of the
RENEWABLE AND CONVERTIBLE death benefit for a limited period, but also offer the highest form of
savings in a specified period.
They can be renewed after their coverage period, if the plan
is for 1 year or a year renewable term the policyowner may choose to Endowment plans have premiums that are generally higher
extend the coverage for another year for a higher premium, since the that that of Term, Whole Life and Limited Pay Life Plans.
term plans have Natural Premiums. Usually the renewal can be done
continuously up to a specified age. Since the renewal of term life TYPES OF ENDOWMENT PLANS
plans present an increased possibility of Antiselection it is customary
for the company to charge higher rates for renewable plans than REGULAR ENDOWMENT – provides protection in the form of the
those that are not renewable. death benefit and matures either after a specified number of years,
what we call term-based, for example 20 year endowment, or it may
Term plans are also convertible, which means it can be mature at a specific age of the insured, what we call age-based, for
converted to any permanent plan, anytime while the policy is in example endowment at age 65.
force.
The benefit of a term plan’s renewability and convertibility is
that it can be done without showing any proof of insurability. PURE ENDOWMENT – is a type of endowment which promises to pay
the face amount only if the insured survives up to the end of the
Due to its short term nature, term plans are commonly used specified period, and nothing will be paid if death occurs before the
to secure loan against risk of death. end of the period.

TYPES OF TERM PLAN ANTICIPATED ENDOWMENT – the policyowner does not have to wait
for the maturity date of the endowment before he receives a portion
LEVEL TERM – is a type of term plan in which the death benefit of the face amount.
remains constant over the term of the coverage.
PLANS ACCORDING TO PARTICIPATION
DECREASING TERM – is a type of term plan in which the death
benefit starts at the set face amount and then decreases over the PARTICIPATING – are sold by both stock and mutual companies,
term of the coverage, by the end of the term period the death which may also sell non-participating policies.
benefit is reduced to zero.
In participating policies the policyowner shares in the
PERMANENT PLANS – are called such since they offer longer period dividends or the surplus for distribution. Due to this, premiums of
of protection, even lifetime protection. This plan combines participating policies are higher than that of a non-participating
protection and savings, which build-up of cash values. When the policy.
owner of a permanent life insurance policy pays a premium, part of it
goes to the build up of cash values.
NON-PARTICIPATING – life insurance companies may also sell plans
which do not participate in the shares of the dividends. These plans ACCIDENTAL DEATH BENEFIT (ADB) – pays an additional amount
are called non-participating. which in most cases is equal to the basic plans face amount in case
the cause of the insured’s death is accidental in nature.
COVERAGE
This is commonly referred to as double indemnity and
INDIVIDUAL – these policies provide protection to one person hence requires that the death occurs within 90 days from the date of the
the name there is only person insured in this type of plan. accident and is caused by external, violent and accidental means.

Individual policies are also called Ordinary insurance since WAIVERS OF PREMIUM DUE TO DISABILITY – is a rider which waives
these are payable annually, semi-annually or quarterly basis. It may the premiums payable under the policy in case the insured becomes
also be paid on a monthly basis through payroll deduction in the form totally and permanently disabled.
of Salary Savings insurance.
To be totally and permanently disabled means
JOINT – provide protection to two or more persons, allowing a single uninterrupted disability for not less than 6 months which prevents
plan to have 2 or more Insureds. the insured from engaging in any occupation, employment or
business for which he is suited by education or experience. If this is
The basic joint life plan pays the death benefit to the the case of the insured the life insurance company will no longer
beneficiaries at first death, which means upon the death of any of the require him to pay premiums for as long as the disability lasts. During
insureds, after proceeds are paid out the policy terminates. the period when premium payments are being waived under this
benefit, the cash value of the policy will increase and the policy will
Joint and Last Survivor insurance on the other hand extends continue to earn dividends if participating.
coverage until the last person being covered in the policy dies.
PAYOR’S BENEFIT – is attached to a juvenile policy and is type of
GROUP – this type of plan provide protection to a group of people, Waiver Premium Rider. When the policyowner or Payor dies or
such as employee of a company. becomes totally or permanently disabled the premiums of the policy
will be waived until the child reaches a specified age when he can
In this case the policyowner is the company and the insured earn and pay for the premiums of the policy on his own.
are the employees of that company, and most group policies pay
dividends to the employer. A group of policy covers death due to GUARANTEED INSURABILITY OPTION – provides an opportunity for
natural or accidental causes whether during office hours and in the people to buy specific amounts of additional life insurance coverage
place of employment or outside the job. at stated future intervals without the need to show evidence of
insurability. This means that the insured will automatically pay the
A single master policy covers the entire group, and the standard rate since there would be minimal underwriting
group members do not receive a policy but receive individual requirements.
insurance certificates.
TERM INSURANCE RIDER – an additional amount of coverage for a
A covered employee whose terminates his employment minimal cost, the rider has its own face amount separate from the
continues to be covered for 31 days after the termination date during coverage of the basic policy. Upon the death of the insured the face
this period he/she can exercise his conversion privilege and convert amount of the basic and the face amount of the term rider will be
his coverage to an individual policy without evidence of insurability. payable.

In most companies, the agent’s role in marketing group life FAMILY INCOME RIDER – is a type of decreasing term insurance that
insurance is limited to securing the necessary appointment for the may be attached as a rider to a permanent plan. It generally provides
home office group marketing people. a monthly allowance in addition to the face amount up to the end of
the decreasing term period.
CONTRIBUTORY vs NON-CONTRIBUTORY
ENTIRE CONTRACT CLAUSE
CONTRIBUTORY – the employer and employees share in the
premium payment. At least 75% of the group members must be First - the policyowner is assured that every word of the contract is
included in the plan. contained in the contract. The contract is made up of the policy and
the attached application including a report of physical condition. The
NON-CONTRIBUTORY - the employer pays for the entire premium. contract cannot be affected by later changes, since all the company’s
100% of the group members must be included in the plan. In either obligations and the policyowner’s right have already been written.
case it is assumed every member of the group is insurable provided
that, every member is working minimum number of hours usually 30 Second – the company accepts the applicant’s statements as
hour per week. representation. This means that, to the best of the applicant’s
knowledge, the statement are true. Even if the statements are found
RIDERS – are supplemental benefits attached to the Basic Plan to to be untrue, the contract may be still hold. The company would have
expand the features of the plan at a minimal additional cost. These to prove that it relied so heavily to an untrue statement that it
can cover uncertainties that basic plans cannot cover on their own, otherwise would not have issued the policy, or would have issued it
like accidents, disability, hospitalization and illnesses to name a few. with modifications.
OWNERSHIP PROVISION – this provision states that policyowners 5. Use them to buy Yearly Renewable Term Insurance with any
have valuable rights under their insurance contracts. In this provision, extra cash remaining on deposit with the company and
policyowner have the right to assign, transfer, or have their policies earning interest at a rate to be declared by the company
amended. They can also change their beneficiaries and exercise every from time to time.
option and privilege provided in their contracts or allowed by
company practice. They also have full right to cash values and CRIPY
dividends if any, under their policies. They may also transfer these
rights to others if they so desire. C – Cash
R – Reduce Premium Payments
PREMIUM PAYMENT – tells that premiums may be paid either I – Interest
annually, semi-annually and quarterly. P – Paid-up additions
Y – Yearly Renewable Term Insurance
After the contract becomes binding with the payment of the
first premium, the payment of the subsequent premiums is entirely MISSTATEMENT OF AGE – the age of the insured is very important to
dependent on the will of the insured. Therefore, as long as the determine the correct premium rate for the life insurance. If there
policyowner keeps on paying the premiums, the company is bound to has been a misunderstanding about the applicant’s age, the company
carry out its part of the contract, whatever the future may be. would be acting on wrong information in setting the premium rate
for the policy. Thus, whenever the company learns, after the policy
GRACE PERIOD – occurs when the policyowner neglects to pay the has been issued, that the wrong age was used to establish the
premiums on the due date of the policy. This provisions protects the premium, an adjustment must be made in the amount of insurance
policy from lapsing. The insured is given a period, normally 30 days, protection proceeds the policyowner may receive upon death.
to pay for his premium after the due date. In this scenario, the policy
is still in-force and has not lapsed yet. If the insured passes away INCONTESTABILITY – through this clause, the company is given two
within this period, the proceeds of the policy will be deducted by the years to contest the validity of the policy by reason of concealment
unpaid premium due. or misrepresentation of the insured. The incontestable period will
not begin until the policy has been in force for two years during the
LOAN - one of the privileges the insured can take advantage of lifetime of the insured.
during the lifetime of the policy is the right to loan against its cash
value. Within prescribed limits, policyowners may borrow money The company has the right to question the statements in any
against their policies if they wish. However, the amount should not application and the incontestable clause sets that limit to the length
be exceed the cash value of the policy. These loans may not be called of the time that the company holds that right. After a period of two
by the company and the policyowners may repay the loans at any years of the policy being in force and the company did not raise any
time but be careful for interest on the loans will be charged to the objection during that period, there can be no objections about the
policyowner. payment of proceeds at the insured’s death.

ASSIGNMENT – a life insurance is an asset. Since it is their property, SUICIDE – a suicide clause of the company and its policyowners, a
policyowners have the right to transfer or assign them. If they wish to suicide clause is necessary to discourage financially desperate people
secure loans, they, as assignors can assign their policies temporarily from purchasing policies with suicide already in mind.
to the lenders as security for the loan. The policy is said to be
assigned. The assignment clause sets forth the procedure of assigning If an insured takes his own life within two years of the policy
one’s policy. Because a life insurance company is involved, the being in force, the company will pay the beneficiary a refund of all
policyowner must notify the company in writing, of any assignments the premiums paid by the policyowner. However, if the suicide takes
and the company will accept the validity of the assignment without place after two years, the company will pay the full proceeds as if the
question. The recipient of a policy is called the assignee. reason for death was a natural cause.

DIVIDEND OPTIONS – are paid on participating policies. At the end of BENEFICIARY - since the policyowner’s purpose in purchasing
the year, the company issuing the participating policies looks over insurance is to provide for the security of the beneficiaries, it is very
the year’s operations. If there were fewer claims than anticipated, important to identify them clearly. Beneficiaries are the ones who
investment earnings were better than expected and expenses were will receive the proceeds of the policy.
less than estimated, then a surplus results. The company can return a
part of the policyowner’s premium in the form of dividends. In designating beneficiaries, the first person in line to receive
Dividends vary from year to year and generally start to build up after the death proceeds is called the primary beneficiary. Since the
the second year. primary beneficiary may die before the company begins or completes
paying out the death proceeds, the policyowner usually names a
5 OPTIONS TO CHOOSE substitute beneficiary.

The person next in line to receive the proceeds in case of

1. Choose to have their dividends paid in cash. death of the primary beneficiary is called secondary beneficiary.
2. Use them to help reduce premium payments.
3. Leave them with company to accumulate and earn interest. Policyowners can name more than one beneficiary in any
4. Use them to purchase paid-up insurance or paid-up category and specify how much of death proceeds each one will
additions receive.
 REDUCED PAID-UP
Policyowners also have the right to tell the company EXTENDED TERM INSURANCE
whether or not they want to retain or change their beneficiaries. AUTOMATIC PREMIUM LOAN
When policyowners exercise all their ownership rights by changing
beneficiaries, they designate their beneficiaries as revocable. CASH SURRENDER VALUE – option gives the policyowner the right to
exchange the policy for its equivalent cash value. The cash value is
If policyowners tell the company they want to name certain the savings element of permanent life insurance policies. This option
beneficiaries given up the right to name anyone else at a later time, is drastic and final. The policyowner can claim an immediate payment
then they designate irrevocable beneficiaries. This affects all the of the cash but when this option is applied, the contract stops
contract rights so this decisions should not be made hurriedly. Unless completely.
policyowners have written consent of their irrevocable beneficiaries,
the policyowners cannot surrender the policy, borrow any part of the There are other Non-Forfeiture option that keep part of their policies
cash values, assign the policy or make changes in their policy. alive.

Policyowners can regain full control of their policy if the REDUCED PAID-UP – also called PAID-UP INSURANCE. In this option,
irrevocable beneficiary gives his written consent and if the when the policyowner is unable to make premium payments but still
policyowner outlives the irrevocable beneficiary. needs life insurance protection, the option will take the cash value
built up to purchase paid-up insurance. This means that because the
SETLLEMENT - previously, claims were paid out in lump sum. policyowner will stop paying premiums, the new face amount of the
However, some beneficiaries made unwise investments or client will be smaller but his life insurance protection will still
mismanaged the money and the proceeds were quickly used up. This continue until age 100.
does not solve the main problem that life insurance covers which is
protection for the deceased’s family against financial loss. Now, there EXTENDED TERM INSURANCE – when the policyowner is unable to
are various ways the death proceeds may be paid out to continue premium payments, the company will continue to protect
beneficiaries. him for the original face amount but only until specified period. In
this option, the cash value is used to buy a term insurance contract
Settlement options are ways wherein the company can hold which extends the period of protection even though no more
in trust the proceeds of the policy. The company guarantees the premiums are being paid.
absolute safety of funds and keeps them profitably invested so that
they will earn a fair rate of interest. When there is no non-forfeiture option selected, Extended Term
Insurance, usually takes effect.
DIFFERENT WAY TO SETTLE POLICY
AUTOMATIC PREMIUM LOAN – the company lends to the insured
INTEREST OPTION – the company holds the proceeds for a specified such an amount from the cash value to pay for overdue premiums .
period. Interest earnings will be paid out regularly and are not This can be done as long as there is sufficient cash value to keep the
accumulated. The proceeds of the policy also remains the same. policy active. The policy will also remain in force for only such period.
After the cash value has been exhausted, the policy will lapse unless
FIXED PERIOD OPTION – in this option, the company pays the premium payments are resumed and loans are paid.
beneficiary equal amounts at regular intervals over a specified period
of years. Both the principal amount and interest earnings are paid REINSTATEMENT – this is a provision that may revive or save a policy
out. The amount of each installment is determined by the length of even when it has already lapsed. Unless certain conditions apply, the
desired period of time. policyowner has the right to reinstate the lapsed policy and bring its
value up-to-date. However, the reinstatement provision does not
FIXED INCOME OPTION – if this option is selected, the policy apply to policies that have been surrendered already for their
proceeds are used to pay out a specified amount of income as long as equivalent cash value.
the proceeds last. It pays out both the principal proceeds and
earnings from interest. The policyowner also has a limited period of time to reinstate a
policy. The period is three years. This means that after three years of
LIFE INCOME OPTION – under this option, the beneficiary receives a lapsation, the policyowner cannot revive his policy anymore. In some
guaranteed regular income, not for a specified period of years, not as companies, reinstatement can be done even when the policy has
long as the proceeds last but for the primary beneficiary’s entire lapsed for five years.
lifetime, no matter how long he lives. The principal and the interest
are paid out with the amount of payment calculated to last a lifetime. TWO WAYS TO REINSTATE

NON-FORFEITURE OPTIONS – as long as policyowners keep on paying PURE REINSTATEMENT – the policyowner pays back all past due
for their premiums, the company is compelled to carry out its premiums plus interest on these premiums. The policyowner would
promise. But what if the policyowner decides to quit paying the also have to pay all outstanding loans plus interest due and even
premium because of unavoidable circumstances? The policyowner prove insurability. The contestable period and suicide clause starts all
has options to choose from when they want to quit paying for their over.
premiums.
REDATING – a new premium would be charged to the policyowner
CASH SURRENDER VALUE based on the policyowners’s new attained age and a new contestable
period and suicide clause starts over. The premiums that were paid VARIABLE – variable annuities cannot guarantee an interest yield
will be applied to the lapsed policy years and a new policy effectivity from investment because its results are usually geared mostly to a
date take effect. portfolio of common stocks.

ANNUITIES – is not really a life insurance policy. It is merely a For conventional variable annuities, the investment yield is
purchase of income. It is answer the needs of people who would guaranteed and is based on fixed-dollar investments which specify
want a steady flow of income during the later years. Individuals who their interest and maturity values.
purchase annuities are called annnuitants.
For deferred variable annuities, the period of time during which
An annuity is a scientific liquidation of both capital and interest with funds accumulate is called the accumulation period. During this
income payments so calculated that the annuity income is not period, the value of each individual account rises and falls depending
depleted before the person receiving it dies. on the fund’s investment results.

An annuity offers no life insurance protection so the plan cannot be It is possible for the variable annuity fund to generate monetary gain
outlived. It is simply an accumulation and distribution of cash to from investment income in the form of interest or dividends and
provide income. The annuity plan is guaranteed so long as the person from the profit derived from the sale of securities for more than their
receiving it lives. purchase price, resulting to capital gains.

It is a contract that provides a series of periodic payments starting at ANNUITY SETTLEMENT ARRANGEMENTS
a specific date and continuing for a fixed period or for the life of the
person entitled to receive the payment. LIFE ANNUITY - life annuity will provide a series of periodic payments
to the annuitant for his entire life.
DIFFERENCE OF ANNUITIES FROM LIFE INSURANCE CONTRACTS
CASH REFUND ANNUITY – if the annuitant dies after annuity income
So how are annuities different from life insurance contracts? has already begun, the beneficiary will receive the cash payment
Annuities are the opposite of life insurance contracts because the equal to the annuity fund less the amount of income already paid out
principal purpose of life insurance contract is the systematic creation to the annuitant.
or accumulation of capital while annuity contracts deal with the
systematic liquidation of capital. INSTALLMENT REFUND ANNUITY – if the annuitant dies after annuity
income has already begun, the beneficiary will receive the same
In life insurance, the risk of the company lies in the person dying too monthly income untill all installment are paid – equal to the annuity
soon while annuities, the risk of company lies in the person living too fund.
long.
PERIOD CERTAIN ANNUITY – if the annuitant dies within a specified
TYPES OF ANNUITIES

FIXED AND VARIABLE

TYPES OF FIXED ANNUITIES

SINGLE PREMIUM IMMEDIATE ANNUITY - as the name suggests,

single premium indicates that the entire premium is deposited in the
annuity fund at one time. In this fund, the income begins
immediately. So, a single premium annuity is paid for in a single lump
sum. The company, then begins to pay the annuitant a regular
income right away. This is guaranteed to last as long as the annuitant
lives.

SINGLE PREMIUM DEFERRED ANNUITY – similar to the first type of

fixed annuity, this annuity fund is purchased by making a single
payment. However, annuity income will begin some years after the
single payment is made.

INSTALLMENT DEFERRED ANNUITY – this annuity fund is commonly

referred to as Retirement Annuity. This is a fund that is built up
through a series of regular payments. The annuity will also begin
some time in the future. In this plan, the annuity is accumulated
gradually over the years by regular premium payments plus interest
earned by accumulating fund. If the annnuitant dies before the the
annuity income begins, the fund will be paid to the designated
beneficiaries after a certain costs are deducted.