MODULE 4: POLICY PROVISIONS - Policyowner may repay the loans at anytime

- Interest on the loans may be charged to the

1. Entire Contract Clause
policyowner
a. First -The policyowner is assured that every
- If loan unpaid at death of insured, loan balances
word of the contract is contained in the
and any interests are deducted from proceeds at
contract. The contract is made up of the
the time of claim.
policy and the attached application including
6. Assignment
a report of physical condition. The contract
- Life insurance is an asset
cannot be affected by later changes, since all
- It is their property. They have the right to transfer
the company's obligations and the
or assign them.
policyowner's rights have already been
- If they wish to secure loans, they, as assignors
written.
can assign their policies temporarily to the
b. Second - The company accepts the
lenders as security for the loan. The policy is said
applicant's statements as representation.
to be assigned.
This means that, to the best of the
- Policyowner must notify the company in writing
applicant's knowledge, the statements are
of any assignment and the company will accept
true. Even if the statements are found to be
without question.
untrue, the contract may still hold. The
- Recipient is called assignee
company would have to prove that it relied
7. Dividend Options
so heavily on an untrue statement that it
- Dividends are paid on participating policies
otherwise would not have issued the policy,
- Dividends are not guaranteed
or would have issued it with modifications.
- Good earnings and less expenses = surplus =
2. Ownership Provision
dividends
- Policyowners have valuable rights under their
- To get dividends (5 options) Policyowners may:
insurance contracts.
7.1 Choose to have their dividends paid in cash
- Right to assign, transfer, or amend policies
7.2 Use them to help reduce premium payments
- Can change beneficiares
7.3 Leave them with the company to accumulate
- Exercise every option and privilege provided in
and earn interest
the contract
7.4 Use them to purchase paid-up insurance or
- Have full right to cash values and dividends
paid-up additions
- They may also transfer these rights to others if
7.5 Use them to buy Yearly Renewable Term
they desire
insurance with any extra cash remaining on
3. Premium payment
deposit with the company and earning
- Payment annual, semi-annual, per quarter
interest at a rate to be declared by the
- After the contract becomes binding with the
company from time to time.
payment of the first premium, the payment of
- CRIPY
the subsequent premiums is entirely dependent
a. C - Cash
on the will of the insured. Therefore, as long as
b. R - Reduce Premium Payments
the policyowner keeps on paying the premiums,
c. I - Interest
the company is bound to carry out its part of the
d. P - Paid-up Additions
contract, whatever the future may be.
e. Y - Yearly Renewable Term insurance
4. Grace period
- Occurs when the policyowner neglects to pay
premiums on the due date
- Protects the policy from lapsing Policy provisions when the insured dies:
- The insured is given a period, normally 30 days,
1. Misstatement of Age
to pay for his premium after due date. (policy is
- Wrong age is found out after the policy has been
still in force, not lapsed)
issued, there will be adjustments in the amount
- After the grace period, the proceeds of the policy
of protection proceeds that they will receive
will be deducted by the unpaid premium due.
whether younger or older.
5. Policy loan
2. Incontestability Clause
- Right to loan against its cash values
- The company is given two years to contest the
- Within prescribed limits, policyowners may
validity of the policy by reason of concealment or
borrow money against their policies if they wish.
misrepresentation of the insured.
- Amount should not exceed cash value
 - The right to question any application
- After two years, there can be no objections about
the payment of proceeds.
3. Suicide
- If an insured takes his own life within two years
of the policy being in force, the company will pay
the beneficiary a refund of all the premiums paid
by the policyowner.
- However, if the suicide takes place after two
years, the company will pay the full proceeds as
if the reason for death was of natural cause.
4. Beneficiary
- Beneficiaries are the ones who will received the
proceeds of the policy
- It is important to identify them clearly
- Primary beneficiary – first person in line to
receive the proceeds (first in line can die at any
time, the policyowner can name a substitute
beneficiary)
- Secondary / Contingent beneficiary – second in
line
- Policyowners can name more than one
beneficiary in any category and specify how
much proceeds each one will receive
- Policyowners also have the right to tell the
company whether or not they want to retain or
change their beneficiaries.
- When policyowners exercise all their ownership
Policy provisions when the insured quits:
rights by changing beneficiaries, they designate
their beneficiaries as revocable.
- If policyowners tell the company they want to
name certain beneficiaries and give up the right
to name anyone else at a later time, then they
designate irrevocable beneficiaries.
- Unless policyowners have the written consent of
their irrevocable beneficiaries, the policyowners
cannot surrender the policy, borrow any part of
the cash values, assign the policy or make
changes in their policy.
- Policyowners can regain full control of their
policy if the irrevocable beneficiary gives his
written consent and if the policyowner outlives
the irrevocable beneficiary.
5. Settlement
- Settlement options are ways wherein the
company can hold in trust the proceeds of the
policy.
- The company guarantees the absolute safety of
funds and keeps them profitably invested so that
they will earn a fair rate of interest
- different ways to settle policy proceeds:
a. Interest Option - The company holds the
proceeds for a specified period. Interest
earnings will be paid out regularly and
are not accumulated. The proceeds of
the policy also remain the same.
b. Fixed Period Option - In this option, the
company pays the beneficiary equal
amounts at regular intervals over a
specified period of years. Both the
principal amount and interest earnings
are paid out. The amount of each
installment is determined by the length
of desired period of income.
c. Fixed Income Option - If this option is
selected, the policy proceeds are used
to pay out a specified amount of income
as long as the proceeds last. It pays out
both the principal proceeds and
earnings from interest.
d. Life Income Option - Under this option,
the beneficiary receives a guaranteed
regular income, not for a specified
period of years, not as long as the
proceeds last but for the primary
beneficiary's entire 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.
1. Non-Forfeiture Options - What if the policyowner
decides to quit paying premiums because of
unavoidable circumstances? The policyowner has
options to choose from when they want to quit
paying for their premiums.
a. Cash Surrender Value - gives the
policyowner the right to exchange the policy
for its equivalent cash value. The cash value
is the savings element of permanent life
insurance policies. This option is drastic and
final. The policyowner can claim an
immediate payment of cash but when this
option is applied, the contract stops
completely.
b. Reduced Paid-Up Option (Paid-Up
Insurance) - when the policyowner is unable
to make premium payments but still needs
life insurance protection, the option will take
the cash value built up to purchase paid-up
insurance. This means that because the
policyowner will stop paying premiums, the
new face amount of the client will be smaller
but his life insurance protection will still
continue until age 100.
 c. Extended Term Insurance - when the
policyowner is unable to continue premium
payments, the company will continue to
protect him for the original face amount but
only until a specified period. In this option,
the cash value is used to buy a term
insurance contract which extends the period
of protection even though no more
premiums are being paid.
When there is no non-forfeiture option
selected, Extended Term Insurance, usually
takes effect.
d. Automatic Premium Loan - the company
lends to the insured such an amount from
the cash value to pay for overdue premiums.
This can be done as long as there is sufficient
cash value to keep the 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
premium payments are resumed and loans
are paid.
2. Reinstatement
- Revive or save a policy after lapse
- The policyowner has the right to reinstate the
lapsed policy and bring its value up-to-date,
unless otherwise stated by conditions.
- However, the reinstatement provision does not
apply to policies that have been surrendered
already for their equivalent cash value.
- The policyowner also has a limited period of time
to reinstate a policy. – 3 years
- This means that after three years of lapsation,
the policyowner cannot revive his policy
anymore.
- 2 ways to reinstate the policy:
a. Pure Reinstatement - the policyowner
pays back all past due premiums plus
interest on these premiums. The
policyowner would also have to pay all
outstanding loans plus interest due and
even prove insurability. The contestable
period and suicide clause starts all over.
b. Redating - a new premium would be
charged to the policyowner based on
the policyowner's new attained age and
a new contestable period and suicide
clause starts over. The premiums that
were paid will be applied to the lapsed
policy years and a new policy effectivity
date take effect.
MODULE 5: ANNUITIES
Annuity
- Not a life insurance, merely a purchase of income
- Purchased by people who want a steady flow of
income during the later years
- People who purchase annuities – annuitants
- a scientific liquidation of both capital and interest
with income payments so calculated that the
annuity income is not depleted before the person
receiving it dies.
- offers no life insurance protection so the plan
cannot be outlived
- simply an accumulation and distribution of cash
to provide income
- annuity plan is guaranteed so long as the person
receiving it lives.
Annuities Life Insurance
 systematic  systematic creation
liquidation of or accumulation of
capital. capital
 risk of the company  risk of the company
lies in the person lies in the person
living too long dying too soon
Type of Annuities
1. Fixed
a. Single Premium Immediate Annuity - 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.
b. 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.
c. Installment Deferred Annuity - This annuity fund
is commonly referred to as Retirement Annuity.
This a fund that is built up through a series of
regular payments. The annuity income will also
begin sometime in the future. In this plan, the
annuity is accumulated gradually over the years
by regular premium payments plus interest
earned by the accumulating fund.
* If the annuitant dies before the annuity income begins,
the fund will be paid to the designated beneficiaries after
certain costs are deducted.
2. Variable - cannot guarantee an interest yield from
investments because its results are usually geared mostly
to a portfolio of common stocks.
a. Conventional Variable Annuities - the investment
yield is guaranteed and is based on fixed-dollar
investments which specify their interest and
maturity values.
b. Deferred Variable Annuities - the period of time
during which funds accumulate is called the
accumulation period. During this period, the
value of each individual account rises and falls
depending on the fund's investment results.
- It is possible for the variable annuity fund to
generate monetary gain from investment income
in the form of interest or dividends and from the
profit derived from the sale of securities for more
than their purchase price, resulting to capital
gains.
Annuity Settlement Arrangements
Annuities have different settlement arrangements, especially
when the annuitant passes away after annuity income has
already been provided. They are as follows:
1. Life Annuity
- Life Annuity will provide a series of periodic
payments to the annuitant for his entire life.
2. Cash Refund Annuity
- If the annuitant dies after annuity income has
already begun, the beneficiary will receive the cash
payment equal to the annuity fund less the amount of
income already paid out to the annuitant.
3. Installment Refund Annuity
- If the annuitant dies after annuity income has
already begun, the beneficiary will receive the same
monthly income until all installments are paid - equal
to the annuity fund.
4. Period Certain Annuity
- If the annuitant dies within a specified period, such
as 10 or 20 years, the same annuity payments will
continue to his beneficiary until the end of the
specified period.
5. Joint and Full Survivor Annuity
- An annuity income is paid jointly to an annuitant
and his beneficiary. If either dies, the same income
continues to the survivor for life. When the survivor
dies, no further payments are made to anyone.

- Joint and 2/3 Survivor Annuity is similar to Joint and

Full Survivor, except that the survivor's income is cut
to 2/3 of the original joint income.

- Joint and 1/2 Survivor Annuity is similar to the

statement above, except that the original income of
the survivor is cut in half.
 MODULE 6: LEGAL ASPECTS
1. Life Insurance Contract
- A legal contract between two parties of the
contract – the Policyowner and the Life Insurance
Company
Types of Contract
a. Valued Contract - it specifies the
amount of benefit that will be payable
when a covered loss occurs, regardless
of the actual amount of the loss that was
incurred.
b. Contract of Indemnity – a contract
wherein 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. Life
insurance is NOT a contract of
indemnity.
 a Life Insurance contract is
treated primarily as an
indemnity agreement is when
a creditor insures the life of a
debtor to protect himself
c. Informal Contract – Life insurance is an
informal contract. It is a contract
enforceable because the parties to the
contract met requirements concerning
the substance of the agreement.
d. Formal Contract – is enforceable
because the parties to the contract met
certain formalities concerning the form
of the agreement. These formalities
generally required that the contract be
in writing and that the written
document have some form of seal to be
enforceable. LIFE INSURANCE IS NOT A
FORMAL CONTRACT.
e. Unilateral Contract – only one of the
parties to the contract, Insurer, has a
legally enforceable obligation.
f. Bilateral Contract – both parties to the
contract have legally enforceable
obligations. LIFE INSURANCE IS NOT
A BILATERAL CONTRACT.
g. Aleatory Contract – one party
provides something in value to
another party in exchange for a
conditional promise. A conditional
promise is a promise to perform a
stated act if specified, uncertain
event occurs, then the promise must
be performed. If the event does not
occur, the promise will not be
performed. Also under an Aleatory
Contract, if the specified event
occurs, one party may then receive
something of greater value than
what the party gave.
h. Commutative Contract – an agreement
which the parties specify in advance the
values that they will exchange.
Moreover, the parties generally
exchange items or services that they
think are relatively equal in value. LIFE
INSURANCE IS NOT A COMMUTATIVE
CONTRACT.
i. Contract of Adhesion – one party
prepares the contract which the other
party may accept or reject as a whole,
without any bargaining between the
parties to the agreement.
j. Bargaining Contract – one in which both
parties, as equals, set the terms and
conditions of the contract. LIFE
INSURANCE IS NOT A BARGAINING
CONTRACT.
- Life insurance is a: Valued; Informal, Unilateral,
Aleatory, and a Contract of Adhesion.
- For the Life Insurance to be valid, there must be
an OFFER and ACCEPTANCE. – One party must
make an offer and another party must accept
that offer in order to form a legal contract.
CONDITIONAL RECEIPT
- Issued when consideration or premium is
received by the life insurance company.
- The risk is taken from the person’s shoulder and
assumed by the company when the premium is
paid.
Legal Capacity – the policy owner and insurer must both
have the legal capacity to enter into a contract.
A. Life Insurance Company
 Registered with the Securities and Exchange
Commission (SEC)
 Accredited and regulated by the Insurance
Commission (IC)
 Has a minimum capitalization as prescribed
by the Insurance Commission
 B. Policyowner
 Of sound mind and body
 Of legal age (18 years old)

2. Insurable Interest
- Exists when a policyowner has a reasonable
chance of suffering financial loss, if the person
who is insured dies.
- Although insurable interest does not have to
exist throughout the duration of the policy or at
the time of the claim, it should have existed at
the time the policy was issued – POLICY
INCEPTION.

Existence of Insurable interest

Every person has insurable interest in the life and

health:

a) Of himself, of his spouse and of his children;

b) Of any person whom he depends wholly or in
party for education or support, or in whom he
has pecuniary interest.
c) 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
d) Of any person upon whose life any estate or
interest vested in him depends.
MODULE 7: ETHICS

Unethical Practices

1. Twisting
- Inducing a policyowner, whether forcibly or not,
to replace, discontinue, or lapse a policy in order
to purchase a new one, either from the same
company or another. This interrupts one’s plan of
insurance and starts all over to build up values in
another. This often results to even more financial
loss to the policyowner.
2. Knocking
- Advisors should not succumb to being
unprofessional by making derogatory remarks
about other advisors or companies.
- Penalties – reprimands, fines, imprisonment
- The IC has the power to revoke the license when
this is committed.
3. Overloading
- Advisors always have to act in the client’s best
interest since we rely on their trust and
confidence in us.
- It is not an advisor’s job to squeeze as much
money as possible out of making sales.
4. Rebating
- Is an act which can cause you to lose your license
to sell life insurance.
- Discounts and rebates should not be practiced.
- Equal treatment should be upheld.
5. Misrepresentation.
- Occurs when the advisor makes any written or
oral statement, which does not tell the exact
truth about the policy’s benefits.
- Impression is given that dividends are
guaranteed future payments or false information
is entered in the application to secure the
issuance of the contract.
MODULE 8: THE INSURANCE COMMISSION AND EXAM

Insurace Commission office – 1071 United Nations Avenue, 5. Proceed to OIC Licensing Division at United Nations Avenue,
Ermita, Manila Manila

- Was created to govern life and non-life insurance
companies
- Even pre-need companies
- Concerned with the issuance of licenses to
insurance and reinsurance companies.
- Examines the financial condition of insurance
companies to ensure solvency and to render
assistance to the public on matters pertaining to
insurance.
- Headed by INSURANCE COMMISSIONER.
- This regulatory agency is under the Department
of Finance
- It has the power to judicially settle any claim or
complaint involving not more than P100,000.
And these cases are decided within 90 days.
Insurance Code - Since the industry is placed in a position of
trust, this special law was promulgated to govern insurance.
Schedule of OIC Exams:
- Every Tuesday, Thursday and Friday
- 8:30-9:30 am
- 9:30-10:30 am
Don't forget to submit the Application Form to the test proctor
for processing. If approved, proceed to the cashier and pay the
examination fee. Now, you can take the exam.
Wait for your result. The test proctor will return one copy of
the Application for Insurance Agent's Examination form with
the result stamped ("PASS" or "FAIL")
If you Pass, submit the Application with results to Licensing
Section, Agency Operations. If you Fail, you may sit-in for a
retake. Please ask your proctor about the procedure or the
next examination date.

Because of the many provisions rendered obsolete in the

Presidential Decree No. 612, a decree to consolidate and
codify all the insurance laws of the Philippines was passed. It is
now known as the Insurance Code of 1978 or Presidential
Decree No. 1460.
The Insurance Code contains all the necessary guidelines,
responsibilities and requirements of insurance companies in
the Philippines.
Insurance Commission Examination – it is the Insurance
Commission's duty to regulate the the behavior of all the
companies, aiming towards professionalism and practicing
proper ethics. In line with this goal, the Insurance Commission
administers a licensure examination for all its insurance agent
candidates.
Validating Final Exam
1. Successfully complete the Sun Life Basic Training Course
2. Pass the IIAP-VFE Simulated Exam and secure Form 0930
from Sales Training and Development Department
3. Completely fill-out the form and attach two (2) 1x1 identical
photos and bring a photocopy of your valid ID.
4. Proceed to the IIAP at the 26th Floor, Ayala-FGU Center 6811
Ayala Avenue, Makati City
Schedule of IIAP-VFE:
- Every Saturday

- 8:00-9:00 am

Insurance Commission Exam Requirements

1. Successfully complete the Sun Life Basic Training Course

2. Secure NBI Clearance and Certificate of Life Insurance

Training with your signature, your recruiter or Unit Manager,
New Business Manager and Sun Life authorized representative
(2 copies each)

3. Accurately, legibly and completely fill out the Application for

Life Insurance Agent's Walk-in Examination Form (3 copies in
your own handwriting)

4. Attach one (1) copy of your 1x1 Identical ID Photo on the

upper left hand corner of each application form