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Are politicos and scuba divers uninsurable? Is life insurance in pesos okay?

I believe that thrift is essential to well-ordered living. — John D. Rockefeller

He who does not economize will have to agonize. — Confucius

Avoid grumbling, be frugal, considerate, and frank; be temperate in manner and speech; carry yourself with authority. — Marcus Aurelius

I believe the Philippines and Asia can help reverse the tide of gloom in the West. Let us save and not waste, work harder, and invest. We continue our advocacy to encourage a national culture of savings in partnership with the Philippines’ largest capitalized, oldest and most profitable homegrown life insurance giant, Insular Life.

Thanks to Philippine STAR readers from Miriam College, particularly the students under Prof. Rod Cornejo, for inviting me to speak. Thanks also to the UP College of Business Administration graduating students under Prof. Art Ilano for inviting me to share my business ideas and economic views tomorrow, March 10, at 4 p.m.

Even if some letters can’t be published due to space limitations, I’ll try to have all your questions answered by Insular Life executives. Thanks so much to the top officials of Insular Life for taking the time to share the following expert advice with four letter-writers:

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QUESTION 1

I’m Roy Chua, 40 years old, the general manager of Daily Supermarket in Cubao, Quezon City. I believe in your column’s very good and praiseworthy advocacy of savings.

I have some questions. What kind of insurance should we buy, considering that we live in the Philippines and our peso is not the strongest in Asia? Isn’t devaluation a problem if we buy life insurance with endowments or money-back features and shouldn’t we just buy more life insurance here purely for protection only in case of unpredictable death? What is Insular’s advice and forecast on the peso?

ANSWER 

Roy, thank you for your very relevant questions. We agree with you that the first priority in buying a life insurance policy should be for financial risk protection to ensure the continuation of income for your family in case an unexpected tragedy happens. Once this is done we also advocate securing additional policies primarily for forced savings purposes, and finally for long-term investing. 

Like all financial instruments, life insurance policies are not immune from the effects of inflation or currency devaluation, but the same holds true for the premiums that are paid. Therefore, in terms of relative values, it affects both sides of the cost-benefit equation equally. This is why life insurance must be viewed as a continuous program, and one of the duties of an insurance agent is to regularly review the policyholder’s coverage to determine if it is still sufficient or in need of upgrading. 

Diversification can be applied to life insurance by acquiring dollar-denominated policies as well (now available locally). Currency diversification can thus partly address your concerns. As for forecasts on the peso, I’m afraid I am not qualified to render an opinion. However, my perspective has always been to match my liabilities with the appropriate currency assets. In other words, I will keep on accumulating peso life insurance policies for my family’s protection because their expenses are denominated in pesos. I will tend to do the same with certain forced-savings needs, like education and retirement, because those costs are in pesos as well. For long-term investing I may think of balancing currencies for yield purposes.

Jesus Alfonso G. Hofileña

Executive Vice President & Head

Sales & Marketing Group

QUESTION 2

I’m married to a young, bright politician and I was wondering if it’s true that he is not insurable. First, I heard that life insurance companies have a list of so-called non-insurable occupations, which supposedly includes politics. Secondly, my husband and I love scuba diving as a hobby. Is it true that life insurance companies do not like this hobby as well? What are other restrictions or don’ts on the list? Your advocacy of encouraging and educating the public to save — that is a very positive campaign and I wish to congratulate you and The Philippine STAR for this advocacy. Thank you.

ANSWER

In assessing an application for insurance, we consider the factors that could affect the risk exposure of the person to be insured. Such factors include age, build, physical/medical condition, occupation, avocation, and financial condition, among others. An application for insurance is accepted as applied for if any of these factors are found to be within the standard. On the other hand, should any of these factors pose extra risks to the proposed insured’s mortality or morbidity, the application may be: 1) approved but with a higher premium; 2) approved with amendments or exclusions on some benefit riders to cover for the extra risks; 3) declined if with multiple risk factors which cannot be covered anymore; or 4) deferred if further evidence is still needed to assess the client’s insurability.

It is true that we follow a set of guidelines in assessing risks. As it is given that different types of occupations and avocations present varying degrees of risk, then we do have guidelines for these as well. 

Politicians may apply for life insurance, but they will also be risk-assessed accordingly as to the amount of coverage and kinds of benefits they can qualify for. However, applications from politicians or candidates for public office are usually restricted or deferred six months before or after an election period for risk-management reasons. 

Scuba divers may be insured and may either be accepted as standard, with adjusted premium, or with amendments or restrictions on some benefits. Their assessment will depend on the nature, frequency and depth of their diving activities, among other risk factors that need to be evaluated. You and your husband may apply for insurance through any of our financial counselors. We can send one of them to you for an evaluation of the insurance program most suitable to your circumstances and lifestyle.

Mona Lisa B. de la Cruz     

Senior Vice President & Head

Administrative Operations Group

QUESTION 3 

My name is Mrs. Hill Cervantes de Roberts here in Marbella (Malaga), Spain. I’m a Filipina who always reads Philstar.com and your interesting columns. My British husband and I have been living in Europe for almost three decades now. He has always invested his savings in treasury bonds, savings certificates and deposits. What we do not have, or haven’t considered doing, is investing in life insurance. Can you please tell me the pluses and minuses? And because we are childless, what would happen if one dies before the other, or we both died in strange circumstances other than vehicular or airline accidents? Who would benefit from our life insurance? Thank you and more power to The Philippine STAR!

ANSWER 1

The first and most important purpose of life insurance is to provide adequate financial resources in the event there is a sudden and unexpected loss of income because of the death or disability of the primary breadwinner. Despite your being childless, I believe this is why you do save and invest your money — to achieve financial security. Hence, to the extent that your current assets may not be able to provide sufficient liquidity for the expenses of the surviving spouse, that amount can be calculated and would be the basis for determining the amount of insurance coverage needed. Life insurance, therefore, should be consistent with your wealth management objectives. 

The “plus” in life insurance is that it immediately provides the full amount desired in case time runs out. Other financial instruments will only provide the original principal plus whatever interest is gained up to that point. A “minus,” however, is if one acquires life insurance only at a much older age; then the premiums would be more prohibitive because life expectancy is assumed to be shorter.

Jesus Alfonso G. Hofileña

Executive Vice President & Head

Sales & Marketing Group

ANSWER 2

Providing financial protection to those who are left behind upon the premature death of a loved one is precisely one of the more important purposes of life insurance. Under a contract of life insurance, the insurance benefit shall be paid to the designated qualified beneficiary or beneficiaries in case of death of the insured individual. Thus, if one of you secures life insurance designating the other as his or her beneficiary, the said beneficiary shall receive the proceeds of the insurance upon death of the insured.

In case the beneficiary dies before the insured individual, and there are no other designated beneficiaries at the time of death of the insured, then the proceeds are paid to the insured’s estate, if no other beneficiary or beneficiaries were designated in the meantime. This is, however, the general rule. It is therefore advisable to carefully study the applicable provisions of the insurance policy contract on this matter.

In the event that the insured individual and the beneficiary or beneficiaries die simultaneously and that there is no way by which we can determine who died first, then the law has provided for certain rules to serve as a guide in determining survivorship. Section 3 of Rule 131 (“Burden of Proof and Presumptions”) of the Rules of Court provides as follows:

“Section 3. Disputable presumptions - The following presumptions are satisfactory if uncontradicted, but may be contradicted and overcome by evidence:

That except for purposes of succession, when two persons perish in the same calamity, such as wreck, battle, or conflagration, and it is not shown who died first, and there are no particular circumstances from which it can be inferred, the survivorship is determined from the probabilities resulting from the strength and age of the sexes, according to the following rules:

1. If both were under the age of 15 years, the older is deemed to have survived;

2. If both were above the age of 60, the younger is deemed to have survived;

3. If one is under 15 and the other above 60, the former is deemed to have survived;

4. If both be over 15 and under 60, the sex be different, the male is deemed to have survived; if the sex be the same, the older;

5. If one be under 15 or over 60, and the other between those ages, the latter is deemed to have survived.”

Renato S. de Jesus                   

Vice President & Head         

Legal Affairs Coordinating Office

QUESTION 4

I’m Stephanie Obiles, in my 20s. I’m wondering if a person can have too many insurance policies? I admit to having difficulties saying no, especially when presented with so-and-so benefits and what-ifs, so right now I have about five insurance policies from three different agents.

ANSWER 1

Yes, it is possible for a person to be “over-insured,” but this is something that insurance companies take into account when they evaluate your financial risk situation. Ultimately it is not the number of policies you own but the total amount of coverage you have that should determine whether or not you are adequately insured. At your young age, I would assume that your insurance purchases thus far have been mostly for estate creation and long-term savings. It is advantageous to acquire life insurance policies while young because the premiums are so much lower, and they will never be worthless because they will always represent future financial benefits that are contractually guaranteed.

You should always be clear on the purpose of your life insurance purchases. Life insurance is there to provide for specific financial needs or goals. Hence, ask yourself each time you are approached what your specific need for life insurance is. Your insurance agent must discuss this with you and must not only be interested in merely selling you a product. This distinguishes the professional financial advisers in our profession.

Jesus Alfonso G. Hofileña

Executive Vice President & Head

Sales & Marketing Group

ANSWER 2

Our economic value increases as we amass wealth. Similarly, our family’s risk to our loss increases as their dependence on us grows. If we are to truly protect our economic worth to ensure that our family’s economic well-being is not disrupted by our untimely loss, we need to continually upgrade our insurance coverage. There is a saying in the insurance industry that “one can never have enough protection from insurance.”   If we diligently assess on an annual basis how much insurance we really need, we will know it is never enough. Stephanie, I invite you to visit the Insular Life website at www.insular.com.ph and use the financial calculator available in the website so you can make a self-assessment of how much insurance you need by now. This service is available to anyone who wishes to use the facility — as Insular Life’s way of providing self-help tools to other Filipinos locally or abroad.

Amelita F. Tamayo                 

Vice President & Head

Marketing & Agency Services

* * *

For inquiries regarding financial management or details on the products mentioned in this column, visit the Insular Life website at www.insular.com.ph or e-mail brand@mx.insular.com.ph. You can also call Insular Life’s Brand Marketing at 771-1818 loc. 1310 and 1311.

Thanks for your letters, all will be answered. Questions, comments or suggestions welcome at willsoonflourish@gmail.com or add my Facebook account, then send your questions.

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