Without frugality none can be rich, and with it very few would be poor. — Samuel Johnson
Industry, thrift and self-control are not sought because they create wealth, but because they create character. — Calvin Coolidge
Let us all work harder, invest, save, insure, decisively lessen corrupt politics and innovate to defy the revised forecast of the International Monetary Fund (IMF) that Philippine economic growth will decline by one percent this year — the first negative growth since the 1998 Asian Crisis.
Congratulations to the Philippine Franchise Association (PFA) for organizing the biggest international franchise show in the country called “Franchise 2009” on July 1-5 at Crowne Plaza Galleria Hotel and SMX Convention Center. Franchising is indeed one good way to start your own business and this industry should be supported. To know more, log on to www.pfa.org.ph or www.franchise2009.com. I once also told Philippine franchising pioneer Samie Lim that his industry should expose and sanction some unscrupulous business people who go into franchising either unprepared, inept or with dishonesty. Fortunately, however, most Philippine franchisers are generally good.
Thanks to Pilipino Star Ngayon columnist Ben Tulfo for interviewing this writer for his Bitag TV show on the recent spate of daytime bank robberies and other crimes. I reiterated many business people’s view that peace and order are non-negotiable requisites before foreign and local investors can be enticed to do business here.
Thanks for your many letters! We continue The Philippine STAR’s tie-up with the Philippines’ largest and oldest homegrown life insurance giant, Insular Life, to discuss your life insurance, investment and personal finance questions. Today, we’ve randomly chosen the following eight questions for Insular Life officials to answer:
Question 1: How and when can beneficiaries know if one has life insurance?
I believe in savings, especially in not having any vices; my only “bisyo” is traveling. I support your very positive advocacy of promoting savings in Philippine society, including the importance of life insurance. In fact, the only real question I have about life insurance is addressed more to my wife, and I have asked her several times in the past whether our children know that I have life insurance policies just in case anything happens.
Joey de Leon, host of Eat Bulaga
(Author’s note: My own question in connection with Joey’s query is how can people know if their parents or loved ones bought life insurance policies before? What if a deceased person’s family did not know a policy existed and did not inform the insurer?)
Answer
I would assume that your children are among your designated beneficiaries. Informing the designated beneficiary/ies of the existence of life insurance coverage really depends on the discretion of the insured himself/herself. First of all, informing them of their designation as such will make them aware of the insured’s love and care for them. On the practical aspect, knowledge of the existence of the insurance would ensure that the beneficiaries would be able to claim for the benefits just in case the contingency (death or disability) happens. The insurance company can only initiate the processing of the claim for the insurance benefit from the time it is notified of the happening of the contingency. However, we would like to caution that the disclosure must be made only to trusted individuals to minimize, if not avoid, any security risk to the insured.
Atty. Renato S. de Jesus
Vice President & Head
Legal Affairs Coordinating Office
Question 2: What is the best life insurance with medical insurance?
Congratulations on your Philippine STAR series on life insurance, which makes a complex topic fun to read and easy to understand. I also agree with your advocacy to promote savings as a national habit in Philippine society. I want to ask this: What is the most practical life insurance policy for someone of my generation (I’m 27), and does Insular Life sell policies with built-in or add-on medical insurance, too? What are the features and benefits of this policy; what are the costs?
Iza Calzado, actress, model
Answer
In general I would encourage young people to get life insurance as a means of being able to accumulate money for future needs. I find that putting money away regularly through life insurance has better chances of keeping those funds intact through the years; hence the discipline of forced savings in addition to your usual ways of saving money. I also advocate adding accident and health insurance as well as medical benefits such as critical illness or cancer coverage and daily hospital income because of your active lifestyle. While these are general suggestions, life insurance must be customized to one’s particular circumstances, financial needs as well as priorities. As an actress and model you understand best the necessity to make your clothes fit your personal measurements. It’s the same with life insurance. For example, what if you told me you are the sole financial provider for your parents or siblings? If so, I would then urge you to get whole life insurance that will give continuing income to your family because the greatest threat they face is if something happens to you. In other words, it is necessary for one of our professional risk advisers to sit down with you to determine what insurance program will best suit your specific requirements.
Yes, Insular Life offers policies with medical benefits as well. Our medical riders pay cash benefits when someone is diagnosed with critical illnesses like cancer, heart ailments, cirrhosis of the liver, etc. You may also secure hospital benefits that pay a daily hospital allowance for as long as 1,000 days per illness. This may be used to augment the room and board for hospitalization or replace income lost when someone is hospitalized. The rates for these benefits are quoted in units and may range from a few hundreds of pesos to a few thousands depending on the age of the proposed insured and his health condition.
Jesus Alfonso G. Hofileña
Executive Vice President & Head
Sales & Marketing Group
Question 3: Does a smoking habit affect the premiums of life insurance?
In a life insurance application an agent once gave me, why did they ask if I smoke and how many packs per day? Does a person’s smoking habit — I don’t like smoking because it is unhealthy — affect insurance premiums?
Christine L. Garcia, Iloilo City
Answer
Yes, a person’s smoking habit may affect life insurance premiums. If an applicant for insurance smokes more than a threshold number of packs per day, an additional premium will be charged.
Mona Lisa B. De La Cruz
Senior Vice President & Head
Administrative Operations Group
Question 4: Is life insurance truly exempt from taxes?
Is it true life insurance proceeds are tax-free?
Janice M. de la Serna, Cagayan de Oro City
Answer
Yes, based on our National Internal Revenue Code, the proceeds of a life insurance policy paid to the beneficiary/ies upon death of the Insured are exempt from income tax. Furthermore, the life insurance benefit is likewise not subject to estate tax on the estate of the deceased insured individual if the beneficiary/ies was/were designated as irrevocable.
Atty. Renato S. de Jesus
Question 5: Can creditors get the insurance money from a deceased borrower?
I am a Philippine STAR subscriber who finds your series very educational. I’m just curious about this scenario. If a person who died has many debts and creditors are after his assets, can creditors legally force life insurance companies to turn over life insurance money to them instead of the dead person’s beneficiaries or loved ones?
Charlene V. Garcia, Bacolod City
Answer
No, the creditors are not entitled to claim any benefit issuing from the life insurance policy of the deceased insured-debtor. The life insurance proceeds shall be paid to the policyholder’s designated beneficiary/ies, subject only to the rights of any assignee on record pursuant to an assignment made by the policyholder during his lifetime.
Atty. Renato S. de Jesus
Question 6: Is life insurance in dollars better; do you have dollar policies?
Buying life insurance here is more expensive. Why not buy from a foreign firm that is cheaper? Do you have dollar policies; are those better?
Robert Allan K. Uy, Baguio City
Answer
Purchasing insurance policies from companies not registered to do business in the Philippines may have added risks. This is because they do not fall under the jurisdiction of our Insurance Commission and therefore policyholders of such policies cannot turn to the IC for regulatory assistance or relief if they encounter problems with their offshore issued policies, not to mention that it is illegal for an overseas company to sell insurance here if it is not duly authorized to operate in the Philippines. Finally, one must also consider possible administrative concerns. I know someone whose son had an offshore policy and when his son died, it took close to two years for the claim to be processed and finally settled because of the problems of having to deal with a company thousands of miles away. This should also be taken into consideration.
Life insurance rates are priced based on the risk assumed and the cost of covering such a risk. Generally, however, life insurance premiums from a mutual life insurance company such as Insular Life are more competitively priced compared to insurance premiums from publicly listed companies. The difference lies in the fact that mutual life insurance companies do not have stockholders to whom dividends are paid. Mutual life insurance companies are owned by its policyholders, who stand to gain through dividend earnings and lower premiums.
In answer to your second question, yes, Insular Life offers dollar-denominated products. Its variable unit-linked dollar product (which is called Dollar Wealth Builder) is single-pay and is available for a minimum investment amount of $2,000. It can accommodate additional premiums (called top-ups) in multiples of $500. The product has embedded life insurance cover amounting to 125 percent of the premiums paid. For someone on the lookout for a dollar-denominated investment product laced with insurance protection, we strongly suggest the Dollar Wealth Builder.
Amelita F. Tamayo
Vice President & Head
Marketing & Agency Services Division
Question 7: Life insurance for employees? Does Insular have non-life insurance?
I am Marilou So of Cathedral Movers Cargo Trucking, Quezon City, 42 years old, and the mother of four sons. Can you please ask Insular Life if it is possible for my husband and I to insure our truck drivers and other employees? What are the requirements needed and the costs involved to give them protection? Can the insurance cover accidents as well as life, too? What type of life insurance is advisable for my drivers and employees, which my husband, James, and I can pay for their benefit? Does Insular Life also have a non-life insurance business so I can perhaps have our trucks insured with them, because I am impressed reading your columns about its 100-year track record and financial strength.
Answer
Insular Life offers a full range of life and accident insurance products, and we can therefore recommend suitable policies for your employees and truck drivers. Since risk assessment needs to take into account a person’s occupation, premium rates as well as coverage and other benefits may vary depending on the type of work done by your workers.
If you want to provide insurance as a benefit for your employees, an appropriate product to consider a group life, accident and medical insurance for your people because this is a very cost-effective way of covering them. For example, we have Group Term Insurance, which provides protection in case of death of an employee; Group Hospitalization Insurance, which reimburses expenses in case of hospitalization of an employee; a Comprehensive Group Plan (CGP) that provides insurance protection plus a funding mechanism for your employees’ retirement plans (which is mandated by law to be provided by every employer). We would welcome an opportunity to meet with you to present all these options.
Insular Life also provides property and casualty insurance through its non-life affiliate, Mapfre-Insular, a leading general insurance company. Mapfre-Insular is among the top five non-life insurance companies in the Philippines and is one of the most strongly capitalized at more than P1 billion. The company has an excellent claims payment and service record. We would be happy to answer your questions regarding the products offered by Mapfre Insular. Please contact Noel Deverala at 893-4411 or nmdeverala@insular.com.ph.
Jesus Alfonso G. Hofileña
(Author’s note: With your permission, I will forward your e-mail address to Insular Life so they can address your need for insuring your trucks.)
Question 8: Is investing in stocks okay? How do you choose which stocks to buy?
I am Joseph Andrew Yao Shih, a 22-year-old management student at De La Salle University and Philippine STAR subscriber. I always enjoy reading your columns and learn a lot of new, interesting things. My questions for Insular Life officials are: Is investing in stocks wise and how do we choose which ones to buy? Does Insular Life invest in stocks also and where?
Answer
There is always wisdom in investing for as long you are wise with your investments. First and foremost, there must be an understanding that money invested in these forms of securities is “extra funds.” By extra funds, we mean that you have savings and insurance on top of your immediate and short-term needs. Secondly, you must be prepared to stay invested for a long period of time to fully appreciate the benefits of the long-term goals and performance of corporations. Lastly, the selection of stocks as a form of investment should fit your personal risk-return profile. On the economics side of investments, stock investments in the long-term are also a natural protection to inflation as corporations are expected to grow faster than this rate.
In answer to your second question, there are many approaches in choosing which stock one can buy. But basically, long-term investors such as Insular Life look for companies with strong financial track records of performance and for stable/capable management with succession programs ensuring corporate continuity and growth. Also, we look at corporations that consistently deliver dividends or companies that perform well regardless of the country’s economic condition. Another factor that may be considered is if the company is positioned to take advantage of sunrise developments within or outside the country.
Information such as those stated above can be gathered from newspaper dailies and from the websites of respective corporations and regulators. However, given the size of information available and the limited time available to process them, the act to invest or dispose a position may be too late, as the market may have already moved according to the nature of information.
To free yourself from the day-to-day hassles of information gathering, analyzing and investing directly in stocks, you may want to instead consider investing in Insular Life’s variable funds; in particular, the Wealth Series Equity Fund or Balanced Fund, which invests in listed equities of prime corporations.
Alan Joseph S. Amador
Senior Manager
Investment Management Staff
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For more inquiries, call Insular Life’s Brand Marketing Department at 582-1818 loc. 1850 and 5124 or e-mail brand@mx.insular.com.ph or visit website: www.insularlife.com.ph.
To know more about growing and conserving your wealth, call our Customer Value Management Department at 582-1818 loc. 1857and 5133 to schedule a Wealth Management Forum for your group.
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Thanks for your letters. Questions on life insurance plus any comments are welcome at willsoonflourish@gmail.com or add me on Facebook to e-mail messages.