TRADITIONAL LIFE

AND VARIABLE LIFE

REVIEWER
 prepare for and pass the
licensing examinations given by
the office of the Insurance
Commission (IC)
TRADITIONAL LIFE
REVIEW
Morning agenda

• life insurance concepts

• types of plans
• riders
• insurance provisions
Life insurance concepts

transfer of personal risk

pooling and sharing of risk

substitutes uncertainty with

certainty
Basic terms

INSURED the person whose life is

given protection

BENEFICIARY recipient of death

BENEFICIAR proceeds
Y
POLICYOWNER person who owns the
OR PAYOR Policy and pays the
premiums
Basic terms
FACE AMOUNT
or amount payable to the
SUM ASSURED Beneficiary

PREMIUM amount of money paid in

BENEFICIARY exchange for protection

POLICY the written contract of

insurance between the Insured
and company
Insurable interest

exists if a person stands to suffer an

economic loss if the Insured dies

Relationships where insurable interest

exists:
– spouses, parent and child, siblings
– pecuniary (creditor-debtor)
– business partners
– key person insurance
Life insurance concepts

Business uses: Other uses:

– keyman insurance – mortgage

– collateral redemption
insurance
– contingency fund
– estate creation
– business continuation
– estate conservation
Types of premiums

NATURAL premiums which increase

PREMIUMS as one ages

LEVEL premiums which remain the

PREMIUMS
BENEFICIARY same for the entire duration
of the contract
Modes of payment
SINGLE
PREMIUM premium paid in lump-sum

FRACTIONAL
PREMIUM premium paid more than
BENEFICIARY once a year

ANNUAL
PREMIUM
BENEFICIARY premium paid once a year
Factors in premium rate determination

Mortality factor Interest Loading

estimates how investment earnings operating costs
many people are from collected
expected to die premiums
within a given year
Risk selection

the process of identifying and

classifying risk

also known as underwriting

guards against anti-selection

Risk factors

age physical condition

built morals

occupation hobbies and

avocations
personal history
gender
family history
residence and
habits
travel
Risk classification

PREFFERED
RISK lower than usual mortality

STANDARD within expected risk or

RISK normal risk

SUBSTANDAR
SUBSTANDARD
higher than usual mortality
RISK
D
RISK
UNACCEPTABLE uninsurable or declined
Life insurance policies

individual policies

group

industrial

participating - non participating

temporary - permanent
How does a participating plan work?

MORTALITY
SAVINGS

participating
DIVIDENDS Policyholders
INTEREST SURPLUS
EARNINGS

LOADING
SAVINGS
Basic plans
TRADITIONAL VARIABLE

PERMANENT SINGLE PREMIUM

TEMPORARY
(with CASH VALUES)
REGULAR PREMIUM
LEVEL TERM LIMITED PAY
PAR NON-PAR

DECREASING TERM

WHOLE LIFE ENDOWMENT

ORDINARY LIFE REGULAR ENDOWMENT

LIMITED PAY LIFE ANTICIPATED ENDOWMENT

LIMITED ENDOWMENT
Types of traditional plan

TERM
a contract that pays the Face Amount
only in the event of death within a
stated number of years

protection
premium paying period
benefit period (upon death)
 Types of term plan

LEVEL TERM
PhP 5 million

PhP 4 million

PhP 3 million

PhP 2 million

PhP 1 million

YEAR YEAR YEAR YEAR YEAR

1 2 3 4 5
Advantages of term plans

• affordability

• option for renewal

• option for conversion

Advantages of term plans

RENEWABILITY

option to extend the CONVERTIBILITY

contract for a specific
period without option to change to
undergoing a whole life or
medical exam endowment before
the contract expires
without undergoing a
medical exam
 Types of traditional plan

PERMANENT
offers protection and savings
MATURITY
BENEFIT:
PhP 1 million FA=CV

ISSUE AGE MATURITY

Types of permanent plan
Insurance protection is until age 100.
WHOLE Premiums are payable until age 100.
LIFE Policy matures at age 100.

MM
SUM ASSURED AT
PhP 1 million
(INSURANCE PROTECTION)
A
TU
RI
U
TY
R
PREMIUM PAYING PERIOD I
T
Y

ISSUE AGE 30 AGE 100

 Types of permanent plan
Insurance protection is until age 100.
ORDINARY Premiums are payable until age 100.
LIFE Policy matures at age 100.

MM
SUM ASSURED AA
PhP 1 million
(INSURANCE PROTECTION)
TT
UU
RR
PREMIUM PAYING PERIOD II
TT
YY

ISSUE AGE 30 AGE 100

 Types of permanent plan
Insurance protection is until age 100.
LIMITED Premiums are payable for a limited period.
PAY Policy matures at age 100.

M
PhP 1 million INSURANCE PROTECTION A
T
U
R
PREMIUM PAYING PERIOD I
T
Y
ISSUE AGE 30 AGE 100
Types of permanent plan
Insurance protection is for a specified period.
ENDOWMENT Premiums are payable within a specified period.
Policy matures at the end of a specified period..

M
A
PhP 1 million INSURANCE PROTECTION T
U
R
PREMIUM PAYING PERIOD I
T
Y
ISSUE AGE 30 20-YEAR ENDOWMENT AGE 50
Types of endowment plan
ANTICIPATED ENDOWMENT 60%
of FA

M
A
INSURANCE PROTECTION T
U
20% 20% R
of FA of FA
I
T
Y
ISSUE AGE 30 AGE 40 AGE 45 AGE 50

20-YEAR ANTICIPATED ENDOWMENT

Types of endowment plan
100%
SPECIAL ANTICIPATED ENDOWMENT of FA

M
A
PhP 1 million INSURANCE PROTECTION T
U
20% 20% R
of FA of FA I
T
Y

ISSUE AGE 30 AGE 40 AGE 45 AGE 50

20-YEAR SPECIAL ANTICIPATED ENDOWMENT
Types of endowment plan
LIMITED ENDOWMENT
M
PhP 1 million INSURANCE PROTECTION A
T
U
R
PREMIUM PAYING PERIOD I
T
Y

ISSUE AGE AGE 65

30

10-PAY ENDOWMENT AT 65
Summary

COVERAGE BENEFIT CASH VALUE

TERM LIMITED PROTECTION

PROTECTION
WHOLE LIFE LIFETIME
AND SAVINGS

PROTECTION
ENDOWMENT LIMITED
AND SAVINGS
Riders

Riders provide auxiliary benefits that

basic plans do not offer.

For the extra benefit, a small

additional premium is added.
Riders

WAIVER OF PREMIUMS

TPD refers to an
Insured shall no longer uninterrupted Once Insured is
pay premiums for his disability for not less able to be gainfully
Policy once he/she than six months employed,
becomes totally and which prevents the he/she shall
permanently disabled Insured from resume paying for
(TPD). engaging in any premiums.
gainful occupation,
employment or
business for which
he was fitted by
education or training.
Riders

PAYOR’S BENEFIT
Premiums shall be TWO TYPES:
waived upon
attached to • Payor’s
death or total and benefit for
juvenile policies
permanent death (PBD)
disability of the • Payor’s
payor until child- benefit for
Insured reaches death and
the age of majority disability
or end of the (PBDD)
premium payment
term which ever
comes first.
Riders

ACCIDENTAL DEATH BENEFIT

This provides
additional cash
“double indemnity”
benefits if the
Insured dies due to
an accident.
Riders
EXAMPLE:

ADB: PhP 1 million

FA: PhP 1 million

ISSUE AGE AGE 70 AGE

30 100
Riders

TERM INSURANCE RIDER

This provides for additional benefits
on top of the basic coverage upon
death of the Insured before the end
of the term insurance period.
Riders
EXAMPLE:

10-YEAR TIR:
PhP 1 million

FA: PhP 1 million

ISSUE AGE AGE

AGE 30 40 100

death after two years

death benefit: PhP 2 million
Riders
EXAMPLE:

10-YEAR TIR:
PhP 1 million

FA: PhP 1 milion

ISSUE AGE AGE

AGE 30 40 100

death at age 60
death benefit: PhP 1 million
Riders

FAMILY INCOME RIDER

This rider is a decreasing
term insurance that provides
a monthly allowance in
addition to the Face Amount
if death happens within a
stipulated period.
Riders
EXAMPLE:

10-YEAR FIR:
PhP 10,000/month

SA: PhP 1 million

ISSUE AGE AGE AGE

30 40 100
death after 1 year
Riders
EXAMPLE:
FIR:
PhP 10,000/month
for nine years

SA: PhP 1 million

ISSUE AGE AGE AGE

30 40 100
death after 1 year
Riders
EXAMPLE:

10-YEAR FIR:
PhP 10,000/month

SA: PhP 1 million

ISSUE AGE AGE 40 AGE

30 100

Death at end of year 8

Riders
EXAMPLE:
FIR:
PhP 10,000
per month
for two years

SA: PhP 1 million

ISSUE AGE AGE

AGE 40
30 100
Death at end of year 8
Riders

HEALTH INSURANCE RIDER

This rider provides It may be in the
additional benefits in form of:
case the Insured • medical
suffers from expense
disability, illness or coverage
diagnosis of a dread • disability
disease. income
• lump-sum
cash
Riders

EXAMPLE:
HIR: medical expense
reimbursement, disability income,
lump-sum cash, daily hospital
income

SA: PhP 1 million

ISSUE AGE 30 AGE 100

Riders
RIDER BENEFIT CONDITION WHO’S COVERED
WP premium is total and permanent Insured
waived as it disability
falls due
PB premium is PBD: death Payor
(attached to waived as it PBDD: death and/or
juvenile falls due total and permanent
policies) disability
ADB additional death due to accident Insured
coverage
“principal
sum”
TIR additional death within the Insured
coverage specified term
FIR monthly death within the Insured
income for the specified term
Beneficiary
HIR additional diagnosis of specific Insured
health illnesses, confinement,
benefits etc.
Life insurance contract

UNILATERAL one legally enforceable

CONTRACT promise

CONTRACT OF Insured would only accept or

ADHESION reject the contract

payment of claims depends

CONDITIONAL upon certain acts
CONTRACT (i.e., payment of premiums)
Life insurance contract

the Insurer agrees to pay a certain

VALUED amount of money (Face Amount),
CONTRACT regardless of the actual amount of
loss that was incurred

no exchange of
ALEATORY approximately equivalent
CONTRACT values

EXECUTORY promise of a benefit upon a

CONTRACT future occurrence
General provisions

required Policy imposes certain

provisions which obligations on the
spell out and protect insurer in favor of the
the rights of Policyholders
Policyholders and
Beneficiaries of life
insurance
Policy provisions

➢ entire contract clause ➢ reinstatement provision

➢ grace period ➢ dividend option
➢ incontestable clause ➢ non-forfeiture option
➢ suicide clause ➢ transfer of ownership
➢ misstatement of age ➢ settlement option
➢ policy loan
Policy provisions

ENTIRE a provision in life insurance Policies that

CONTRACT defines the documents that constitute the
CLAUSE entire insurance contract

refers to a specified period within which a

renewal premium may be paid without
GRACE penalty
PERIOD
(31 days from the premium due date)
Policy provisions

the process by which an insurer puts back into

REINSTATEMENT force a Policy that has lapsed for non-payment
of premiums
• Fill-out an application for reinstatement.
• Pay all back premiums plus interest.
• Present satisfactory evidence of insurability.
• Reinstate within three to five years from the
date of lapsation.
* The two-year contestability period will begin again.
Policy provisions

provision in life insurance policies that limits the

INCONTESTABILITY company’s right to question the validity of the contract
CLAUSE (two years from the issuance or reinstatement of the
Policy)

GROUNDS FOR CONTESTING A POLICY:

A.) fraud
B.) concealment
C.) material misrepresentation
Policy provisions

Sum Assured is payable if insured commits suicide

SUICIDE after two years from the issuance of the Policy or
CLAUSE last reinstatement.

This provision describes how the Sum Assured will be

MISSTATEMENT adjusted to the amount which the premium would have
OF AGE purchased at the correct age, if the age of the Insured
is misstated.

DECLARED AGE ACTUAL AGE FA ADJUSTMENT

30 31 decrease FA
31 30 increase FA
Policy provisions

POLICY a provision that grants the owner of a life

LOAN insurance Policy the right to take a loan for up
to a percentage of the Policy’s cash value.
PROVISION
Death benefit payable while there is a loan:

Face Amount - outstanding loan

Policy provisions
DIVIDEND OPTIONS

cash

reduce premium payment

accumulate to earn interest

buy paid-up additions

buy one-year term

Policy provisions

NON-FORFEITURE OPTIONS
CASH VALUE /
CASH SURRENDER
VALUE The Policyowner surrenders the
Policy for its corresponding cash
value.

EXTENDED
TERM INSURANCE
Cash value is used to buy term
insurance for the full coverage amount
provided by the original Policy.
Policy provisions

EXTENDED
TERM INSURANCE

ETI: PhP 1 million

for a shorter coverage period

SA: PhP 1 million

ISSUE AGE
AGE 100
30
Policy provisions
PAID-UP INSURANCE
(REDUCED AMOUNT)
Cash value is used to buy fully paid-up
insurance with a smaller Face Amount
than the original policy.

new SA < PhP 1 million

SA: PhP 1 million

ISSUE AGE 30 AGE 100
Policy provisions

AUTOMATIC
PREMIUM LOAN payment of an overdue renewal
premium by making a loan against
the Policy’s cash value
Policy provisions
TRANSFER OF OWNERSHIP

an agreement under which one party

transfers some or all his ownership
rights in a particular property to
another party
Policy provisions
TRANSFER OF OWNERSHIP

ABSOLUTE TEMPORARY
ASSIGNMENT ASSIGNMENT

an assignment of a life a temporary assignment of

insurance policy under which the monetary value of a life
the Policyholder transfers all insurance as a security for a
Policyowner rights to the loan
assignee
Ex. Personal loan from a bank
Ex. Absolute assignment from
a parent to a child
Policy provisions
SETTLEMENT OPTIONS

INTEREST The insurer invests the proceeds of a life

insurance Policy and pays interest on
OPTION these proceeds to the payee while the Sum
Assured remains intact.

FIXED-PERIOD
The insurer pays the Policy proceeds and
OPTION interest in a series of equal installments
BENEFICIARY for a specified period of time.
Policy provisions
SETTLEMENT OPTIONS

FIXED AMOUNT The insurer pays the Policy proceeds

and interest in a series of equal
OPTION installments for as long as the
proceeds last.

LIFE INCOME The insurer pays the Policy proceeds

and interest in a series of periodic
OPTION
BENEFICIAR installments over the payee’s lifetime.

Y
UNIT-LINKED
REVIEW
Variable life

Variable life is a life insurance

product where a major portion of the
policy premium is used to purchase
units in the variable life fund
managed by the company.
Variable life

P
Other names

investment-linked

unit-linked

equity-linked
Comparisons with traditional life

• Variable life policies offer the potential for higher

returns but at the expense of market volatility and
a higher degree of risk.

• Variable life policies offer more choices in terms of

the investment fund.

• The investment element of variable life insurance

is made known to the Policyholder at the outset.

• Charges levied on variable life insurance are

stipulated openly.
The link
The value of Policy is
variable contract linked to the value
of the units in the
investment fund.

units in
investment fund

The value of units is

underlying
linked to the value of the
investment
underlying investment.
Types of unit-linked plans

single premium variable

regular premium variable

Characteristics of regular premium

pay premiums regularly

vary the level of regular premium payments

vary the Sum Assured of the Policy

take premium holidays if funds are sufficient

make full and partial withdrawal of units

make single premium top-ups

Top-ups

further single premiums

used to purchase additional

units
How does variable contract work?
Single premium
PhP 10,000

Total charges
PhP 400

Net available
for investments
PhP 9,600

Unit price
PhP 1.50
How does variable contract work?
Single premium
PhP 10,000

Total charges
PhP 400

Net available
for investments
PhP 9,600

Unit price PhP 9,600 / PhP 1.50 =

PhP 1.50 6,400 units
How does variable contract work?
Single premium Partial withdrawal
PhP 10,000 PhP 2,000

Total charges Unit price

PhP 400 PhP 2.00

Net available
for investments PhP 2,000 / PhP 2.00 =
PhP 9,600 1,000 units

Units purchased 6,400 – 1,000 =

6,400 units 5,400 units
Investment assets

Cash and deposits

Fixed income securities

Shares

Common trust fund

Mutual funds

Properties
Investment assets

Cash and deposits

• all liquid instruments that carry little or no risk that the

principal amounts invested can be lost

• highest safety; lowest returns

• cash includes short-term debt instruments: also known

as money market instruments
Investment assets

TREASURY BILLS BANK ACCOUNTS

• short-term government • for fixed periods with
securities to borrow fixed interest rates
money from the
investing public Examples: savings
accounts, time deposits
and offshore accounts
Investment assets
Factors that influence choice of deposits are:

how long the funds

funds available can remain in the
account

whether
emergency prevailing market
withdrawals are conditions
likely
Investment assets

Disadvantages with bank deposits: :

penalties upon
not a good early or
low-yielding in inflation premature
return hedge withdrawal
Investment assets

Fixed income securities

• Government bonds
• Corporate bonds
➢ Debenture stocks
➢ Loan stocks
➢ Convertible stocks
• Preferred shares
Investment assets

Fixed income securities

• certificate showing that the company or government

(bond issuer) has borrowed money from the
bondholder

• return of fixed interest income and payment of principal

at maturity

• stress income and offer little or no opportunity for

appreciation in value
Investment assets

Types of fixed income securities:

A. Government bonds
• The government borrows money from the public
• Interest payments and repayment of principal are
guaranteed
• In times of high inflation, capital can be eroded
Investment assets
Types of fixed income securities:

B. Corporate bonds

1. Senior or loan stocks

- secured loans, with collateral

2. Debenture stocks
- unsecured loans ; no collateral

3. Convertible stocks
- can be converted to ordinary shares
Investment assets

Shares

a shareholder is a part owner of the company

• shares of all major public companies are traded
on the stock exchange while private company
shares are not

• can be a volatile investment

Investment assets
A. Ordinary shares
The holder of an ordinary share in a company is a part
owner of the company and is entitled to share in its profits.
Each share carries one vote at the company meetings.

B. Preferred shares (also a type of fixed income security)

These are shares which give the holder a right to a fixed
dividend provided enough profit has been made. This right
takes precedence over the right of ordinary shareholders to
dividends.
Investment assets

Common trust fund (CTF)

Unit investment trust fund (UITF)
a pool of co-mingled funds contributed by many investors

• managed by specialist fund managers who select the

investments

• kept in trust by a trustee who acts generally to protect the

unit-holders
Investment assets

Mutual funds
similar to that of UITFs - pool contributions from their
investors

• managed by specialist fund managers, whose function is to

buy and sell shares to make investment profits

• generally have a higher risk/reward profile than CTFs

How do they work?

UITFs

VUL
Mutual
Insurance
funds
Investment assets

Properties

Three types of real estate investments:

• agricultural property

• domestic property

• commercial/industrial property
Investment assets

Properties
Price of property depends on the following factors:

• quality of land as reflected on the quality and

profitability of the crops it grows

• location of the land

• value of the buildings on the land

Investment considerations

Key concepts:

1. investment objectives 5. accessibility of funds

2. funds available 6. taxation treatment

3. level of risk tolerance 7. investment performance

4. investment horizon 8. diversification

Benefits of investing in investment-linked products

1. Pooling or Diversification
- wide range of investments with a small sum of money

2. Flexibility
- simple product designs for investment and life insurance protection
- allows the option of investment portfolio

3. Expertise
- managed by professional fund managers

4. Administration
- relieved of day-to day administration of investments
- tracking through life company’s financial statements and financial
pages of newspaper
Risks of investing in investment-linked products

1. Investment risk
- death and disability benefits are dependent on sum assured
and/or value of units
- suitable for those who can tolerate short-term fluctuations in
Fund Value
- not for those who want high protection and guaranteed cash and
maturity values
Risks of investing in investment-linked products

2. Charges
- administration fee, insurance charge, fund management fees,
etc. are not guaranteed and may change over a period of
three months

Types of charges:

SINGLE PREMIUM: policy fee, mortality charges

REGULAR PREMIUM: policy fee, mortality charges, unallocated premiums,

full withdrawal charges

INVESTMENT MANAGEMENT CHARGES: bid-offer spread, fund management

fee
Types of charges
Policy fee
• typically charged as a uniform fee
• used to cover regular running expenses of administering the Policy
• charged regularly

Assurance charges/mortality charges

• mortality
• dread disease
• total or permanent disability and other benefits
Types of charges
Unallocated premiums
Allocation of premiums to purchase units is based on allocation rate.
Unallocated premiums are used to cover marketing and setting-up
expenses of the Policy.

Full withdrawal charge

• deducted when Policy is fully withdrawn for cash
• usually applicable to policies with uniform allocation
• used to cover initial expenses that have been incurred but yet to
be recovered
Types of charges

Investment management charges

Bid-offer spread

• difference between offer and bid prices

• used for marketing costs and expenses in setting-up the Policy

Types of charges

Fund management fee

• for investment expenses
• to provide profits to shareholders
• 0.5% - 2% per annum

amount charged depends on:

• market competition
• the returns expected and
• the profit requirements of the company
Types of funds
Equity fund

Fixed income or bond fund

Money market or cash fund

Balanced fund

Managed fund

Property fund

Geographically-specialized fund
Types of funds

MANAGED FUND
• invest in a managed “basket” of assets
• higher proportion of assets in equities
• less investment in fixed income securities
• asset allocation depends on fund manager’s views

GEOGRAPHICALLY-SPECIALIZED UNIT FUND

• restrict investments to a particular country or region income securities
• offer exposure to different markets in different regions
• currency risk
Risk-return profile

Equities
Managed x
fund

Balanced x
fund
Bond x
Risk

fund
Cash x
fund
x

Return
Switching

➢ facility for transferring from one fund to another

➢ limited number of switches are usually not charged

➢ useful in retirement and education fees planning

Basics of computation
Computing for the number of units

Php 1 million = INITIAL INVESTMENT

PhP 10.00 = PRICE PER UNIT

PhP 1 million
= 100,000 UNITS
PhP 10.00
Computing for the unit price

PhP 1.5 million = INITIAL INVESTMENT

100,000 = NUMBER OF UNITS

PhP 1.5 million

= PhP 15.00 PRICE PER UNIT
100,000
Computing for the fund value

PhP 20.00 = PRICE PER UNIT

100,000 = NUMBER OF UNITS

100,000.00 X PhP 20.00 = PhP 2,000,000

FUND VALUE
Methods of computation

SINGLE PRICING METHOD DUAL PRICING

METHOD
UNIT PRICE OFFER PRICE: price used when
buying units
– buying or selling units
BID PRICE: price used when
selling units
BID OFFER SPREAD: difference
between the offer price and bid
price
Single pricing

DEDUCTIONS

should client wish to get value of investment net of charges

5% INITIAL CHARGE (IC)

1.6% MORTALITY CHARGE (MC)

PhP 100,000 INITIAL INVESTMENT

PhP 1.50 PRICE PER UNIT

Single pricing
DEDUCTIONS

1 PhP 100,000.00 X 5% = PhP 5,000.00 IC

2 PhP 100,000.00 X 1.6% = PhP 1,600.00 MC

3 PhP 100,000.00 - PhP 5,000.00 IC = PhP 95,000.00

PhP 95,000.00
= 63,333.3333 UNITS
PhP 1.50
Single pricing

DEDUCTIONS

4 PhP 1,600.00 MC
= 1,066.6666 UNITS
PhP 1.50

5 63,333.3333 - 1,066.6666 = 62,266.6667 UNITS

Dual pricing method

Examples of transaction Price to use

Single premium
Top-ups Offer price

Partial withdrawal
Full withdrawal
To pay for charges Bid price
Death benefit
Important formulas
Number of units = Single premium / Offer price
Bid price = Offer price ( 1-Spread%) or BO1S
Offer price = Bid price / (1-Spread%) or OB/1S
Accumulation of fund = x (1 + i) n
Dual pricing method

If the offer price is PhP 1.50 and the bid offer spread is 5%,
the bid price can be worked out as:

Bid price = Offer price x (1-spread%)

= PhP 1.50 x (1-5%)
= PhP 1.50 x (1- 0.05)
= PhP 1.50 x (0.95)
= PhP 1.4250
Dual pricing method

Assuming no movement in the prices and charges/ fees are deducted after
the single premium has been invested into the account, how much will the
Policyholder lose if he surrenders the Policy now?
SINGLE PREMIUM = PhP 450,000 BID PRICE = PhP 13.00
BID-OFFER SPREAD = 4% POLICY FEE = PhP 1,800
ADMIN AND MORTALITY CHARGE = 3%

Sum Assured is 200% of single premium or the value of units, whichever is

higher.
Dual pricing method
A. OP = Bid price / (1-S%)
PhP 13.00 / (1 - .04) = PhP 13.5417

B. The single premium in units is:

PhP 450,000 / PhP 13.5417 = 33,234.85 UNITS

C. Less charges:
Admin and MC: 3% x PhP 450,000 = PhP 13,500
Total charges: PhP 13,500 + PhP 1,800 = PhP 15,300
Charges in units: PhP 15,300 / PhP 13.00 = 1,176.92 units
Dual pricing method

D. Units bought less charges:

33,234.85 – 1,176.92 = 32,057.93 UNITS

E. Value of units if withdrawn:

32,057.93 X PhP 13.00 = PhP 416,753.09

F. Policyholder loses:
PhP 450,000 – PhP 416,753.09 = PhP 33,246.91
Computation of accumulation of fund over a period of time

n
Future value = X (1+i)
Value of X after, n = years and it increases by i (interest rate)

What is PhP 20.00 after 10 years if it increases by 5% annually?

Using the formula: X (1+i) n

= PhP 20 (1+ 0.05) 10

= PhP 20 (1.05) 10
= PhP 32.58
Computing for the death benefit

1. Unit value plus Sum assured

Fund Value + Sum Assured

2. Unit value or Death cover whichever is higher

Fund Value or Sum Assured whichever is higher
Unethical practices

M - MISREPRESENTATION
R. - REBATING

T - TWISTING
K - KNOCKING
O - OVERLOADING
Unethical practices

MISREPRESENTATION

the act of making any false and/or misleading

statements in the selling of life insurance

REBATING

the act of accepting a premium smaller than the

one stipulated in the Policy or offering anything of
value as an inducement for the prospect to
purchase the contract
Unethical practices
TWISTING/
REPLACEMENT

the act of persuading a person to lapse or

surrender a Policy in order to purchase a new one
Twisting is a form of Misrepresentation.

KNOCKING

the act of criticizing other agents and other life

insurance companies
Unethical practices

OVERLOADING

the act of persuading a person to buy an amount

of life insurance which is beyond the buyer’s
means and which then forces the buyer to lapse
his Policy in the future
Disclaimer
Established in 1996, Pru Life UK is a subsidiary of British financial services giant Prudential plc.
Pru Life UK is the pioneer and current market leader of unit-linked or investment-linked life
insurance products, and is one of the first life insurance companies approved to market US
dollar-denominated unit-linked policies in the country. Pru Life UK is a life insurance company
and is not engaged in the business of selling pre-need plans.

Headquartered in the United Kingdom, Prudential plc has an extensive network of life insurance
and mutual funds operations around the world covering Europe, the United States (US) and 14
markets in Asia. Its regional office, Prudential Corporation Asia, is based in Hong Kong.
Prudential plc has more than 23 million insurance customers worldwide and manages £457
billion of assets as of 30 June 2014.

Pru Life UK and Prudential plc are not affiliated with Prudential Financial, Inc. (a US-registered
company), Philippine Prudential Life Insurance Company, Prudentialife Plans, Inc. or Prudential
Guarantee and Assurance, Inc. (all Philippine-registered companies).

For more information: www.prulifeuk.com.ph