Too many people spend money they haven’t earned, to buy things they don’t want, to impress people they don’t like. —Will Smith
YANGZHOU, China — Tomorrow is the birthday of the great teacher and philosopher Confucius, who was born on Sept. 28, 551 BC. The tradition of celebrating Teacher’s Day started in Chinese societies worldwide with his birth anniversary.
Confucius and his Confucian moral teachings on discipline, filial piety to parents and ancestors, hard work, frugality, integrity, emphasis on education — all these are Confucian values behind the “economic miracles” all over east Asia. Let us honor and give all-out support to our teachers!
Thanks to Senator Loren Legarda for informing this writer that Timor Leste (East Timor) president and Nobel Peace Prize winner Jose Ramos-Horta reads the The Philippine STAR online via Philstar.com and has read my columns. STAR and the country’s biggest and most profitable life insurance giant, Insular Life, are undertaking this Question & Answer series about money, life insurance and investments as a public service campaign to promote saving money nationwide. E-mail your queries. Today, we have several intriguing questions, and here is the expert advice of Insular Life executives.
Question 1
CAN PEOPLE WITH DIABETES STILL BE INSURED?
I find your advocacy of promoting a savings ethic in our Philippine society very admirable. My question is this: my husband has a diabetes problem, and a life insurance firm already rejected him before after their medical exam. Is there some other way people like my husband can avail of life insurance protection?
Susana Saavedra, 33 years old, housewife and part-time entrepreneur, Baguio City
Answer 1
Yes, there are ways by which your husband can avail of life insurance protection.
1. People with diabetes may actually still be insured depending on his/her current age, compliance to medication as reflected in blood sugar results, the duration of the illness and the presence or absence of other contributory factors such as smoking, hypertension, etc. Of course, with the additional risk factors compared to propose insured without diabetes, a diabetic individual, if insurable, will have to pay a higher premium equitable to the additional risk. Your husband’s insurability may be assessed by initially completing a Diabetic Questionnaire and submitting it together with his attending physician statement and copies of medical records and blood sugar level results. In the extreme event that he is found not insurable at the time of evaluation, he/she may request for reevaluation as soon as his condition has improved.
2. There are insurance products in the market that can cover applicants without need for screening. These products would have higher premiums to reflect the higher mortality risk or deferred coverage to control anti-selection. Amounts of coverage would probably be limited, perhaps up to P2 million only.
3. If your husband’s condition is not too extreme, some products with less mortality risk may be issued to him. This could include unit-linked products where the amount of insurance is limited, or products with high endowment features.
Perhaps your husband can call us at 582-1818 loc. 1850 to discuss options, as we would be in a better position to advise him if we have a more complete picture of his condition.
Ma. Editha C. Elicano, First Vice President, Actuary and Head of Insurance Administration
Question 2
CAN ILLEGITIMATE KIDS BE LIFE INSURANCE BENEFICIARIES?
I regret having been unfaithful to my very good wife years ago, and I have been faithful ever since my mistake, but I have an illegitimate son from my former mistress. I have become very successful in my business, and I don’t want to leave my illegitimate son less than my other kids from my wife. Is it legally possible for me to buy additional life insurance and then make that illegitimate son my beneficiary, although my name is not on his birth certificate, legally he has no connection to me and we’re not related under the law? Also, my former mistress is a very bad and selfish person; can I add in my life policy that in the event of my death before our son is 18, the benefits not be touched by his mother but can I name my younger sister as trustee until he is 18 years old?
Wilfred, 48 years old, businessman, Makati City
ANSWER 2
I admire your concern for and sense of responsibility toward the future of your children, including that of your illegitimate child. The law favors such treatment as it does not prohibit the designation of an illegitimate child as a beneficiary in the life insurance policy of his or her parents, in spite of the nature of his/her parents’ relationship. Anybody can be designated as a life insurance beneficiary (even juridical persons such as corporations, foundations, charitable organizations) provided that they are not disqualified by law.
What the law prohibits, among others, is the designation of one person as a beneficiary by the other in his/her life insurance policy, where both of them are guilty of adultery or concubinage at the time of such beneficiary designation. However, such disqualification does not extend to the children borne out of that relationship between the parties to the adultery or concubinage.
To ensure that your child beneficiary’s interests would be protected in case he becomes entitled to the benefit of your life insurance policy, you may, preferably at the time of the insurance application, designate a trustee of the life insurance proceeds for the benefit of your child-beneficiary during his minority years. Just make sure that you provide the life insurance company with the relevant documents for its guidance during claims settlement.
Atty. Renato S. De Jesus, Insular Life Vice President and Head of Legal Affairs
Question 3
WHY DO SOME HOLLYWOOD FILMS DEPICT LIFE INSURANCE NEGATIVELY?
I love watching movies and would like to ask why Hollywood movies have often depicted life insurance in a negative way, such as firms that don’t like to pay claims and agents who are too pushy? In the 1999 film Fight Club, the main character is an insurance professional who is sick and tired of his boring corporate career. Is life insurance as an industry also boring because your agents keep talking about death?
Answer 3
Salespeople appear to be stereotyped behaviorally as abrasive and overly aggressive. This is unfortunate because while our industry has its share of undesirable agents, there are many more who maintain high ethical standards as well as professional conduct in their sales activities. There are, in fact, Market Conduct Guidelines followed by all the life insurance companies that serve as the basis for directing sales-related behavior. It is the client who ultimately determines if his experience with a salesperson is pleasant or otherwise. We would certainly welcome such feedback.
As for your next question on restoring public faith following the crisis of confidence caused by pre-need companies that failed to fulfill their contractual obligations, we are just as anxious as you to have these matters resolved and to see justice given to the victims. While those companies you cited are not insurance companies, the market associates them nevertheless with the insurance industry. Please allow us to constantly correct this misimpression. The insurance industry is separate and distinct from the pre-need industry. Insurance has been around much longer, is well-regulated by the Insurance Commission and is governed by a law — the Insurance Code — that effectively protects the interests of the insuring public.
Your last movie reference as well as question are most interesting. Career disenchantment can happen in any profession, and there is no evidence that even remotely suggests there is a greater propensity for this to happen in the life insurance selling profession. The essence of our work is financial risk management and it is for this reason that we are duty-bound to discuss the consequences to a family’s economic well-being if there is insufficient financial preparation for the unexpected. Death is not the only reality we face. Health hazards that could lead to financially draining medical expenses or disability, rising cost of living, adequate funding for future expenses such as children’s education and estate taxes, and retirement security are also part of what we need to address in order to have peace of mind and financial stability throughout our lives. For this reason we train our agents to present life insurance more comprehensively by pointing out how it relates to your major life stages. Hence, in our view, the life insurance sales career has a lot to offer the serious financial professional, and there is more than enough to keep our agents busy and motivated to earn a good living as well as to serve their communities in a most noble and relevant way.
Jesus Alfonso G. Hofilena, Insular Life Executive Vice President & Head, Sales & Marketing Group
Question 4
CAN CREATING AN ESTATE EXEMPT PROPERTIES FROM INHERITANCE TAXES?
Your columns are interesting and relevant, especially your business advice and features. My question for Insular Life executives is this: What is the best estate planning? Life insurance is to help estate taxes. Is my plan okay, which is to put all my properties like real estate, money and even paintings into an estate, sort of like a corporation, and this estate shall have a board of directors, so I don’t personally own my properties anymore and if I die, my kids have no need to pay high estate taxes. Is this a good plan?
Christine Bersola Babao, 40 years old, mother of 2 kids, TV host & entrepreneur
Answer 4
On estate planning, everyone who accumulates wealth, whether in properties or other assets, should do a sound estate planning program in order to ensure that what they worked hard to acquire can be passed on to their loved ones. Estate planning’s objective is not to avoid the payment of estate or inheritance taxes. Rather, one does estate planning in order to implement strategies that lead to wealth preservation and transfer even after paying required taxes. One approach to estate planning is what Ms. Bersola-Babao described: incorporating the properties.
Here is the suggestion of our corporate secretary: “Before one sets up a corporation, he has to consider several important factors, especially if he intends to pool all of his properties into the proposed corporation. The matters of national government regulations (like those of the Securities and Exchange Commission), local government regulations (as those in securing business permits), management, bookkeeping, administration, taxation, etc., are some of them. While there are, of course, pros and cons in each of these, all of them should be considered before one can determine the feasibility of setting up the proposed corporation.
“However, putting up a corporation consisting mostly of one’s personal assets (in your example, real estate properties, money and/or paintings/artworks) may not help his/her heirs in avoiding the payment of the estate tax. The estate tax will still have to be paid if the property owner (now a major shareholder in the corporation) passes away. His/her shareholdings in the corporation (now comprising his/her estate) that will be inherited by his/her heir will still be subject to the estate tax as required by law before the ownership of the same can be transferred to the names of the said heirs.”
If the concern is the proper payment of estate taxes when one passes away, why not simply get enough life insurance to cover that obligation? Done properly, the insurance proceeds will be exempt from estate taxes and will provide the family sufficient funds to pay the estate taxes due. In such manner the entire estate can then pass on to the heirs intact. Whole life insurance for estate tax purposes only requires a very small annual premium outlay relative to the coverage. It is the least complicated solution.
Jesus Alfonso G. Hofilena, Insular Life Executive Vice President & Head, Sales & Marketing Group
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