MODULE 1: Foundation of Life Insurance
or approves it, and issued the policy
Insurer – undertaking to pay compensation
Written contract
Face amount – a payout to the beneficiary of a
life insurance policy. Sum Assured (SA), Sum
Insured (SI)
Premium – the amount paid for insurance
Human Economic Value – total value of assets
and any future earnings derived by a person
Pure Risk – example is life insurance
Risk Sharing Principle – small risk on the part
of the insured and transferring large risk to the
insurer
Examples:
 Roman Burial Club - paluwagan
 Code of Hammurabi
Law of Large Numbers – variation in results
(tyansa na magiging tama)
How Premiums Are Determined (Actuary)
Mortality
Interest – earnings from invested premiums
Safety Margin – money set aside by insurance
company to meet adverse claims (mas maaga
kesa sa normal na ini-expect ng company)
Operational Expenses – Overhead expenses
Actuary – the official who makes the necessary
assumption and calculations in respect of the
principal elements in life insurance premium in
order to arrive at the premium rates to be
charged
How Premiums Are Determined
Age of insured
Gender
Insurance plan
Types of Premium Receipt
1. Binding Premium Receipt – makes coverage
effective immediately but only until the
insurance company either rejects the application
2. Conditional Premium Receipt – makes
coverage effective before a policy is issued only
if the proposed insured is found to be insurable
MODULE 2: Basic Insurance Policies
Cash Values – a portion of the premium is
allocated to the cost of insurance and the
remaining deposited into a cash value account
- Earns a modest rate of interest, with
taxes deferred on the accumulated
earnings
Dividends – surplus earnings
- Are not guaranteed
Dividend Options
#1. Cash
- Get dividends as they fall due; or when
it becomes payable
#2. Premium reduction
- Use dividends to pay future premiums
#3. Accumulate at interest
- Leave dividends with the company; earn
a specified rate of interest
#4. Buy paid-up addition
- Use dividends to buy additional
coverage on the same plan
- Sum Assured is getting bigger
#5. Buy a renewable term insurance
- Use dividends to buy a yearly renewable
term equal to the premium paid or cash
value
Cash Values – are guaranteed
- The savings element of permanent plans
allows for the build-up of cash values
 2. Pregnancy Lien – pregnant individuals
applying for insurance
3. Aviation Lien – civilian or member of AFP
MODULE 3: Life Insurance Riders engaged in flying may be

Riders – supplementary contract – must be MODULE 5: Legal Aspects

attached to a basic plan
- Applicable only for a limited period;
terminates at age 60
Types of Riders:
1. Waiver of Premium due to Disability
2. Payor’s Benefit
3. Accidental Death Benefit – proximate cause
of death must be determined (ex. Police report)
-probability of being doubled to the policy
- ex. If you have availed of 3 riders, you have
the right to claim also 3 benefits
4. Term Rider
5. Guaranteed Insurability Rider
Sum Amount of Money – benefit proceeds
specified in the contract
Continuance/Cessation of Life – conditions
stated in the contract as to when benefits will be
paid, i.e. death, disability, old age
Elements Of A Contract
1. Obligation – the insurer is obliged to pay the
proceeds if all conditions in the contract have
been met by the insured
2. Adequate Consideration
- First premium: consideration that puts the
policy in-force
- Subsequent premium: conditions that keep the
policy in-force
3. Contingency – death, old age and disability

4. Legal Purpose
MODULE 4: Risk Appraisal & Selection 5. Mutual Consent
6. Insurable Interest
Representations – are statements in the
application form For the life insurance coverage to be valid,
insurable interest must exist only at the inception
Risk Classification of the policy.
1. Standard – Based on POFMAR
2. Sub standard – Modified or rated policy
3. Postponed
4. Declined

Liens – a limitation in coverage because of

higher risk exposure of the insurer
- When a death benefit of a policy is
restricted in the amount during the early
years of the policy

Types of Liens
1. Juvenile Lien – insured children below 6
years old

Module 6: Policy Provisions
Insured lives
1. Entire Contract – takes effect if and when
upon initial premium payment, approval and
delivery of policy, during the lifetime and good
health of the insured
2. Ownership – PO has the right to amend,
assign and collect dividends if any
3. Premium Payment
4. Grace Period
5. Automatic Premium Loan – for premiums not
paid beyond the grace period, premium due is
deducted or loaned against the cash values;
subject to interest
6. Policy Loan – the PO may obtain a loan for an
amount not exceeding the cash value, 75%-80%
of cash values; loan value (cash value + interest)
is payable at no specific repayment date
7. Assignment
3. Reinstatement – subject to the following
conditions:
A) The polcy has not been surrendered for cash
or converted to ETI which has expired
B) Satisfactory proof of insurability of the
insured is given to the company
C) Payment of all overdue premiums and
outstanding indebtedness
Types of Reinstatement
1. Back Premium Method – accrued premiums
plus overdue interest and current premium to be
paid
- original PED is maintaines
2. Redating Method – PED is adjusted to a later
date
- no need to pay unpaid premiums; only the
difference in premium due to change in PED and
current adjusted premium

Insured dies
1. Misstatement of Age
2. Incontestability Clause
3. Suicide Clause
4. Settlement Options
* Lumpsum – total cash proceeds are given
* Interest option – proceeds are left with the
company for a specified time; interest is paid to
the beneficiary
* Fixed period option
* Fixed amount option
* Life Income
5. Beneficiary
6. Survivorship Clause – a provision applicable
to scenarios wherein the insured and primary
beneficiary perish in the same calamity
- confirmation that the beneficiary survived the
insured is required
- death benefit payment is released until such
confirmation is made
7. Presumption of Death

Insured quits
1. Lapsation
2. Non-Forfeiture Options

MODULE 7: Other Insurance
Annuity Plan – is a purchase of income
Annuities – series of periodic payments where
in a LIC pays out
- Fixed stream of periodic income to a
person in exchange for a series of
premiums
- Commonly known as a purchase of
income typically availed by individuals
preparing for retirement
Important Terms to Remember:
Contract Owner
Payee – the person or entity receiving periodic
income payments
Contingent Payee – the person or entity entitled
to receive payments in the event of the payee’s
death
Annuitant – person whose lifetime is used to
determine terms and benefits payable under the
annuity contract
- Annuities are paid out based on how
long the named annuitant leaves
Typically, the contract owner, payee and
annuitant are the same person.
Types of Annuities (based on elected income
payment option)
1. Immediate – payout schedule that begins
within 30 days to a year from the date of annuity
purchase
- are single premium annuities
- popular among retirees as it provides for their
required retirement fund
- distribution of income begins within 12 months
2. Deferred – payout schedule that starts
sometime in the future
- i.e., more than a year or even decades later
from the time of purchase
- can be purchased with a single or fixed
premium
-ideal for working individuals who wish to
accumulate funds for the future
- has an accumulation phase
PROVISIONS ON PAYOUTS
Payout options are ways that a LIC may
distribute funds from an annuity contract
Several Options An Annuitant May Choose
From
1. Lump Sum Distribution – single annuity
payment distributed to the payee
- annuity contract terminates afterwards; the LIC
no longer has any obligation to the contract
owner
2. Period Certain Annuity – under the fixed
period option pertains to payments distributed
over a specified period of time regardless
whether the annuitant lives or dies
- ex. Monthly payments for a 5-year period as
selected by the contract owner. If payee dies
before the end of a guaranteed period, the
contingent payee is entitled to receive what’s left
of the annuity
3. Fixed Amount Option – specified amount
distributed for as long as the accumulated
annuity value provides regardless whether the
annuitant lives or dies
4. Life Annuity – distribution of annuity
payments throughout the annuitant’s lifetime
Types of Life Annuity (assuming the
annuitant and the payee are the same
person)
a. Straight Life Annuity – annuity
payments done for as long as the annuitant lives
b. Joint and Survivor Life Annuity -
annuity payments distributed to more than one
annuitant and wherein payments cease when all
annuitants pass away
c. Life Annuity with Period Certain –
pay outs are made for as long as the annuitant is
alive
- in the event of annuitant’s death, payments will
still be made to the contingent payee but only for
a selected period
- ex. The contingent payee will be entitled to
receive the payout for the remainder of the
specified period
d. Life with Refund Annuity – payments
made for as long as the annuitant is alive and at
least, payout equates to the amount of the life
annuity’s purchase price
Health Insurance
- It comes in the form of:
a. Expense Reimbursement
b. Disability Income
c. Critical Condition Coverage
d. Accidental Death
e. Dismemberment Benefits
Industrial Insurance – covers work-
related injuries or accidents that occur
on the job
Group Insurance – whereby a group of
people are covered by life insurance
under one master contract issued by the
insurer to an organization or entity
- Is offered in employer-employee
relationships
- An organization that offers group
insurance uses of enrolment cards
instead of application forms
- A certificate of insurance is provided to
employees instead of individual life
insurance policies
- A group of people is covered by life
insurance under one Master Contract
issued by the insurer to the employer;
employees are given a Certificate of
Coverage
- Covers death of employees regardless of
cause, except for suicide in the first two
years
- 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; 1 Master Policy to
the representative of the group
(employer)
- Most group policies are on a yearly
renewable basis
A payment arrangement for group
insurance can either be one of the following:
1. Non-Contributory Group Insurance – where
the employer shoulders 100% of the premiums
2. Contributory Group Insurance
Group Life Insurance/Group Yearly Renewable
Term – temporary group insurance
Group Permanent Insurance
Types of Group Insurance
1. Group Medical Insurance
2. Group Credit Life/Group Creditor’s Life –
purchased by a creditor on the lives of debtors
3. Group Retirement Life
What happens if an employee leaves the
company?
A conversion privilege in group insurance
plans – converts a person’s group plan to an
individual policy without evidence of
insurability. This should be applied for before a
specified period, within 30 days from the date of
employee’s separation from the company. i.e.
resignation or retirement.
According to Training – allows the employee to
convert to an individual policy with 31 days
from date or resignation/retirement without
proof of insurability
In the event wherein the employee leaves the
company which he has group insurance policy,
he may use conversion privilege.
Types of Insurance
a. Universal Life Insurance – permanent life
insurance, wherein premiums and death benefits
are adjustable
b. Variable Life Insurance – permanent life
insurance with an investment component
c. Variable Universal Life Insurance
MODULE 8: Investments in Insurance
LIC get revenues from 2 principal sources – the
sale of life insurance policies where they
generate premiums and second, earnings from
investments. (through premiums and
investments)
- An insurance company may invest in
real estate or securities such as stocks
and bonds
- Bonds – evidence of indebtedness
- - bond issuers owe bondholders
a debt
- - the issuer is obliged to pay
interest called coupons and repay the
principal at an agreed time
Insurance companies are highly regulated by the
IC with regard to the company’s investments
except
- To ensure that insurers remain solvent
- To be able to pay any future claim
- To ensure that the insurance companies
conduct their business fairly
Investments of insurance companies ensure
solvency in paying future claims.
MODULE 9: IC Rules and Code of Ethics
Insurance Commission – under the Department
of Finance
The rules governing the operation of life
insurance industry are contained in the Insurance
Code of the Philippines known as Presidential
Decree 612 (P.D. 612) as amended by RA 10607
The Insurance Code has 2 Primary Goals
1. To ensure that insurers remain solvent, that is
able to meet their debts and pay policy benefits
when they come due
2. To ensure that insurance companies conduct
their businesses fairly and ethically
General Provisions of the Presidential Decree
1. Capitalization – a minimum capital
requirement that an insurance company must
meet before it obtains a license
- every new LIC must have a paid-up capital of
at least 1billion pesos by 2022
- domestic LIC already doing business in the PH
must have a net worth of 250 million pesos
(June 30, 2013), +300 million pesos (December
31, 2016), +350 million pesos (December 31,
2019), +400 million pesos (December 31, 2022)
2. Reserve – amount of money required of a LIC
to meet future claims
- provision to ensure stability of insurance
company
3. Solvency – an insurance company doing
business in the PH shall at all times maintain the
minimum paid-up capital and net worth
requirements as prescribed by the Commissioner
safeguarding it against unfavourable claims or
risks in relation to its investment activities
4. Power of Adjudication – the Insurance
Commissioner has the power to act as judge and
review evidence and argumentation between the
insured and insurance companies on single
claims or cases not exceeding 5,000,000 pesos
(has the power to adjudicate claims, complaints)
- when we say safeguarding public interest, for - Client na kausap ng original agent
the company, it is enforcing high standards or
performance and integrity Quality Business
- as Insurance Agents on the other hand, - Are policies with good persistency
developing a satisfied client base
Conservation is dependent on a number of
Three Requirements Before An Applicant factors:
Can Be Granted A License
- Quality of prospects
1. A clean record of employment
- Analysis on financial needs
2. A good reputation and character
- Servicing
3. A reasonable educational background
In the insurance industry, repeat business is your
Unethical Practices Which May Be Grounds business – less selling effort, registering better
For The Revocation Of The Agent’s License closing ratios
1. Rebating – giving part of the commission to
induce a sale
- premium discrimination against policyholders
2. Twisting – persuading a client to lapse a
policy to get a new one
3. Knocking – making a degoratory remarks
against competitors
4. Overloading – selling insurance that costs
more than what the client can afford to pay
5. Alteration – changing information in the
application form for the purpose of approval
6. Misrepresentation
7. Concealment – withholding information for
the application to be approved

AGENT VIOLATION OF THE LAW

- Issues a receipt and fails to remit
premium collection to the company
- Issues a receipt for the premium that
was not allocated
- Issues an antedated receipt for late
payment
- Delivers a policy and collects premium,
with knowledge that the client is not in
good health

ROLE OF AN AGENT
- Offer after sales service
- Encourage repeat business
- Service orphan policy owners
- Keep records updated and organized
- Ensure that policies are continuously
paid
Orphan Policy Owners – good source of
referrals/new sales