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• Makati Mock Examination Study Notes

Single Premium Policy

• Requires only one premium payment
• Does not necessarily mean a policy that requires a single premium each year
• Is not only available to single individuals
• Payments can be made in advance

Policy Expenses

• A policy fee is a fixed amount added to the premium, regardless of policy size

Required Information for Agent

• An agent needs to know the applicant's age, the plan being chosen, and the face amount desired to calculate premiums for a given policy

Premium Calculation

• To calculate premiums for other modes of premium payment, the annual premium is multiplied by a conversion factor for the mode of payments desired

Healthcare Coverage

• Benefits payable under health insurance policies cover accidental death and dismemberment, expense reimbursement, and disability income

Enrollment Cards

• For employer-employee groups, employees fill out an enrollment card instead of a personal insurance application

Group Coverage Conversion

• If an employee leaves a company with a group insurance policy, their coverage can be changed to an individual policy using a conversion privilege

Legal Contract Requirements

• To be legal and binding, parties to the contract must be legally competent

Life Insurance Applicant

• When a father enters into a life insurance contract on behalf of his child, the father is the applicant-owner

Valid Life Insurance Coverage

• For life insurance coverage to be valid, insurable interest must exist only at the inception of the policy

How Insurance Code Takes Effect

• According to the insurance code, contracts don't take effect unless the policy is delivered to the insured, assignee, or agent, or to a beneficiary
• Contracts do not take effect unless payment of the first premium is made to the insurer or its authorized agent
• Contracts do not take effect unless there has been no change in the insurability of the life to be insured between the time of application and the time the policy was delivered

Practicable Beneficiaries

• Anyone can be a beneficiary, except for someone who owes you money

Life Insurance Law

• Under the law pertaining to life insurance, any person with insurable interest can be named an irrevocable beneficiary

Life Insurance Proceeds and Interest

• When life insurance policy proceeds are left with the company to earn interest, income tax is levied on the interest earnings of the proceeds

Insurable Interest

• A person has an insurable interest in the life of their child or grandchild
• A person has an insurable interest in anyone who depends on them or from whom they receive support or education
• A person has an insurable interest in any person in whom they have pecuniary interest

Beneficiary Designation Restrictions

• Anyone can be designated a beneficiary except for minors and those expressly prohibited by law from receiving donations

When Life Insurance Takes Force

• The common practice of most life insurers goes into force when the agent gives a binding receipt

Parties Involved in Life Insurance

• The parties involved in a life insurance contract are the insurance company and the insured

Common-Law Spouse Beneficiary

• According to insurance law, a common-law spouse cannot be designated a beneficiary if their legal partner is still living and the previous marriage has not been legally dissolved

Lapse Due to Non-Payment

• An automatic premium loan is a a provision in a permanent life insurance policy that may lapse for non-payment of premium

Convertible Policy

• The convertible feature of a term insurance policy allows it to be changed to a permanent insurance policy without evidence of insurability

Insurance Policy and Accidental Death

• Insurance companies will pay the face amount of the policy in the event of accidental death (not suicide within 2 years of buying the policy)

Remaining Insured

• Retaining insurance coverage is possible, by taking a policy loan

Misstatement of Age

• The insurance company will pay the face amount adjusted for misstatement of age

Dividends and Guarantees

• Dividends are not guaranteed

Grace Period for Life Insurance Policy

• The typical grace period provision obligates the life insurance company to the face amount of the policy minus unpaid premiums

Automatic Premium Loan

• Automatic premium loans go into effect requiring no separate action from the policyowner

Assigning a Policy

• When a policy is assigned absolutely the assignee acquires all the rights and interests of the original policyholder

No Named Beneficiary

• If a policy doesn't contain the name of a beneficiary, the beneficiary will be the insured's estate

Premium Non-Payment

• If a policyowner does not pay a premium on the due date, the policy will continue in full force for a period of grace

Irrevocable Beneficiary

• If a policyowner, whose wife is the irrevocable beneficiary, wishes to cash in his policy, he must have the wife's consent

Incorrect Statement

• Any verbal statement made by the agent to the applicant is generally not considered part of the contract

Loan Dividends

• If a policy is taken on a participating policy, dividends for that policy while there is a loan against the policy will go unaffected

Charged Interest

• Interest is charged on policy loans to replace investment income the insurer cannot earn since a loan has been granted

Insurance Plan

• An insurance plan, which offers both protection and savings is called a Permanent Plan

Moderate Means

• A man with moderate means can have maximum protection through Term Insurance

Mr. Valdez's Recommendations

• Mr. Juan Valdez should purchase a Participating Plan to annually receiving dividends

Longest Protection

• An Ordinary Life insurance policy can give someone the longest protection

Policy Purchase at Age 35

• An individual purchasing a policy at age 35 will receive the face amount in 20 years. This is a 20 Yr. Endowment

20 Pay Life Policy

• Insures protection until the age of 100 while protection is for 20 years.

Participating Plan

• Entitles the policyowner to receive a return of excess premiums through Dividends

Rose Cortez's Policy

• Mrs. Rose Cortez owns a Level Term insurance policy which does not provide for the build up of cash values and whose premiums' remain level

Term Insurance

• Two attractive features of a Term Insurance are Convertibility and Renewability.

Policyowners

• A term insurance allows policyowners to convert it to a permanent insurance within a specified period without evidence of insurability contains Convertibility.

Term Policy

• Only offers Protection

Term and Permanent Plans

• Permanent polices provide both protection and savings while term plans offer protection only

Savings Element

• The saving element of permanent plans allows for the build up of cash values

Term Rider

• A term insurance added to a permanent plan

Waiver of Premium

• An optional rider can be attached to a policy stopping further premium payments in the event of disability

Waiver of Premium Requirement

• Effectivness comes through both disability must be total

Accidental Death Rider

• If a policy with the rider becomes paid up the rider ceases

Disability Benefits

• Disability benefits cease for self-inflicted injuries

Pedro Cruz, Suicide Attempt

• Mr. Pedro Cruz would receive neither disability income nor a waiver of premiums

Term Insurance Rider

• A person desiring greater coverage for the least amount of premium has the option of adding a term insurance rider in their permanent life policy

Payor's Benefit

• Provides a waiver of premium benefit in the event of death or disability of the person paying the premiums

Dividends

• If an insured is disabled and his life insurance policy is being continued in force through the waiver of premium, the dividends of the policy would continue as if the owner is paying the premium

Juvenile Policy

• A policy with a minor as the proposed insured

Rated Policies

• It's where life insurance policies are said to payable

Comprehensive

• Certain standards of health and occupation

Least Effect on Premium

• Income has the least effect on a premium charged

Anti-Selection

• Occurs when persons in poor health wish to buy insurance

Defining Insurance Risk

• Risk means hazard on people's lives

Application Disclosure

• Must include every fact in his knowledge that is material to the insurance

Sources of Insurance

• Insurance companies have various sources these include all of the above

Insurance Risk

• Are classified as standard substandard and declined

Substandard Risk

• Risk is considered substandard based on occupation, moral character, and family health history