Richard Gutierrez asks about life insurance; also, can diabetics and a mistress be insured?

Without frugality none can be rich, and with it very few would be poor. —Samuel Johnson

Wealth can only be accumulated by the earnings of industry and the savings of frugality.—John Tyler

The best gift we can give ourselves and our loved ones is the gift of financial security, especially through saving money and via buying life insurance from financially stable firms such as the country’s biggest and oldest homegrown life insurer, Insular Life. Thanks for your many letters and feedback regarding this special public-service project of The Philippine STAR and Insular Life to encourage a national culture of savings and to promote better public awareness about life insurance.

At a recent luncheon, Mike Defensor acknowledged this writer in the course of his speech as “an investment banker,” perhaps due to this series. Actually, I’m not an investment banker, but I strongly believe that there’s no way a country can truly economically develop and liberate itself from poverty without aggressively promoting the ethic and national habit of savings. 

Today is the 205th birth anniversary of the outstanding statesman and literary writer Benjamin Disraeli, the first ever and only person of Jewish ethnic heritage to become prime minister of Britain. Also today in 1958, the strong-willed and visionary Charles de Gaulle won the election as president of France and would become his country’s greatest modern leader. De Gaulle ended the years of chaos that preceded his presidency, spurred industrial growth, and charted an independent foreign policy for France, which included getting out of NATO and recognizing Mao Zedong’s Communist China.

In the May 2010 election, who will be the outstanding new president we elect who can bring political stability, economic growth and social progress to the Philippines?   

Here are some readers’ queries, plus replies by Insular Life executives and experts:

Question 1

Nelia Cruz Sarcol, educator, book author, chief executive officer of CIE Global Colleges, Cebu City, and Legazpi Village, Makati — I am a former Philippine Airlines stewardess, graduated magna cum laude from UP Diliman and I founded CIE because I love education work. I was 21 years old when I first bought life insurance from Insular Life; now this policy has matured after 20 years. When I was constructing our main campus in 1997, the Asian crisis struck, with the exchange rate shooting up from P24-to-the-US dollar to P45, but I survived and CIE is doing well. My question is, is it still viable to buy life insurance nowadays due to inflation and economic uncertainties through the years compared to just bank deposits? Is life insurance as savings viable in the long-term, and what should we do?

Answer 1

Ms. Sarcol, you should be congratulated for your advocacy and valuable contribution to education work. On your specific concern, no financial instrument — bank deposits included — is immune from the erosion of purchasing value brought about by inflation or economic downturns. Having said this, it does not make life insurance any less viable today. It is still better to set aside money for future funding needs and for risk protection against unexpected financial loss like death or disability than to spend everything one earns.  

As your own experience confirms, you managed to survive and CIE is doing well because you did not succumb to despair and continued to value the need for money. As a matter of fact, when it comes to amassing greater wealth for the future, it is absolutely necessary to have a longer-term horizon for saving and investing because the lower interest rate environment today means you have to allow more time to build up your funds to the levels needed for a financially secure future. And while you are doing that, life insurance protection is most necessary so that if the time you require is somehow cut short, insurance proceeds can make up the difference, thus ensuring the fulfillment of your dreams and plans for your family’s welfare.  

Finally, if you wish to preserve the purchasing value of your insurance estate, you should regularly review and be prepared to upgrade your coverage in the same way that constructing a house, buying a car or appliances will require larger financial resources in the years ahead.

Jesus Alfonso G. Hofileña

Executive Vice President & Head

Sales & Marketing Group

Question 2

Richard Gutierrez, actor, model, GMA-7 star of the TV series Full House, 25 years old, single — Is it better to invest money now in real estate or in a business like a restaurant, which is more stable? What do you recommend is the best life insurance for a young actor? Another question about insurance — why is it if something like typhoons are called by insurers “acts of God”? Does life insurance cover deaths caused by acts of God, since non-life insurance seems to exclude acts of God?

Answer

The choice of where it is better to invest one’s money has to take into account the investor’s financial objectives, risk tolerance, experience or familiarity with the business or industry, among others. I’m afraid we would not be in a position to answer your first question because we cannot claim to know you that well (except, however, for your reputation as a topnotch actor, model and TV personality). As for your insurance questions, however, thank you for giving us the opportunity to answer them. Deciding on the best life insurance policy for you would be like going to a tailor for a custom-made suit. In other words, it has to take into account your specific circumstances/situation such as, for example, what risks you are normally exposed to, what your financial objectives are, and who are those who are economically dependent on you for their welfare. For instance, as a young man and prominent actor we presume you live a very active lifestyle and may be quite adventurous. If so, we would highly recommend that you have at least accident and health coverage for your protection. But this is just an example. We can only make a proper recommendation if you will allow one of our risk management professionals to sit down with you for a more comprehensive financial planning. 

On your other insurance question, a life insurance policy is quite comprehensive and will cover death on account of natural causes, illness, or even accidents, except those that are specifically stated in the contract as excluded risks and subject to the usual terms and conditions of the policy.  If you are therefore referring to death by natural causes or illness or accident as acts of God, these would be covered.

Jesus Alfonso G. Hofileña

(Writer’s reply: I think investing in real estate or a business are both good. I suggest you spread your investments in different areas — some real estate, some bank deposits, some life insurance from financially solid companies like Insular Life. Opening any business is a risk; there are good restaurants and there are also many restaurant ventures that fail. I can discuss this in more detail in a future column. The phrase “acts of God” started in Western religious texts as early as the 13th century, and this has become an accepted phrase in legal and insurance circles to refer to any act outside human control.)

Question 3

Geraldine Q. Mendoza, 29 years old, Makati City — I agree with your recent Pacquiao-Krista Sunday column that extra-marital affairs shouldn’t be condoned, but I’m curious: can a mistress have herself insured, will life insurance firms approve a mistress even if the possibility of dangerous threats from the man’s wife is there? Even a mistress needs life insurance protection, too, don’t you think so? 

Answer 3

Yes, a mistress can insure herself. However, just like any other life insurance application, it will be reviewed by the insurance company to determine the risk factors. Some of these risk factors are her age, health and medical condition, lifestyle, and as you said, even threats on her life, if any. The evaluation can result in a standard rating, in which case the insurance policy will be approved and there will be no extra premiums that will be charged to her. On the other hand, if the risk evaluation would result in a sub-standard rating, then it could either result in the imposition of extra or additional premiums, or the case could be deferred or postponed until such time that the high-risk factors are normalized or eliminated, or the life insurance application could be declined altogether.

Atty Renato S. de Jesus

Vice President & Head

Legal Affairs

Question 4  

Melinda V. Gatmaitan, 28 years old, Iloilo City — Our family always reads your Philippine STAR columns, whether your topics are about business or other features. I have a relative who needs life insurance because of his three children, but he is sick with diabetes and his wife claims that he is not healthy enough to be insured. Is this true?

Answer 1

A person who has diabetes may still be insurable, depending on the severity of the diabetes, length of time since onset of the disease, and relative freedom from complications. If his sugar level is well-controlled and there are no other organs involved, he may be insurable, but generally with additional premiums.

Mona Lisa B. De La Cruz

Senior Vice President & Chief Actuary

Answer 2

Melinda, your question is very important and gives us an opportunity to clarify a possible misconception about life insurance. A person does not have to be in perfect health in order to qualify for insurance. Even those with less favorable health conditions may be issued life insurance policies. However, there would most likely be higher premiums charged for the additional mortality risk. But if a medical condition has become more serious, that person may be deemed uninsurable until his health markedly improves. This may be the case with your relative, especially if his diabetes has been assessed by the insurance company’s medical underwriters to be such that it would not be possible to determine the appropriate additional risk premium. Still, the door may not be completely closed for him in the future if he is able to improve or overcome his health impairment. With advances in medicine today, his diabetic condition may still be controlled or cured to the extent that would allow him to be insured.  

Jesus Alfonso G. Hofileña

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For more inquiries, or if you want to schedule a Wealth Management Forum for your group, call Insular Life’s Brand Marketing Department at 582-1818 loc. 1850 and 5124 or e-mail brand@.insular.com.ph or visit website: www.insularlife.com.ph

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Thanks for all your letters. Feedback and questions are welcome at willsoonflourish@gmail.com.