BASIC INSURANCE TERMS

LIFE INSURANCE POLICY Presidential Decree 1460 aka Insurance

Code; Contract whereby a party for a consideration, agrees to pay another a
sum of money in the event of his death from any cause not excepted in the
contract, or upon surviving a specified period or otherwise in the
continuance or cessation of life.

Life Insurance - Contract with two parties (insured and insurer)

Consideration - Premium or the payment
Sum of money - face amount or face value of the policy to be given upon the
cessation of life, which is death or the survival up to a specified period

Parties to a Life Insurance Contract

1) INSURER - The company providing insurance protection

2) POLICY OWNER - The person who is buying life insurance.

3) INSURED - The Policy owner can also be the insured, or the person
whose life is insured under the life insurance policy.

There are some instances that the insured is different from the policy owner.
In the case of a juvenile policy, wherein the parent is buying the policy,
assuming the role of the owner, on the life of the child who will be named as
the insured.

ORPHAN POLICY OWNER whose original advisor has retired or is no

longer active.

BENEFICIARY is the person who is designated by the terms of the policy to

receive the policy proceeds upon death of the insured.

FACE AMOUNT or FACE VALUE as some call it, is the amount stated in
the policy as payable if the insured dies while the policy is in force. This is
basically the amount of insurance provided by the terms of the contract.

PREMIUM is a sum of money given by the insured as the legal

consideration for the insurer's promise to indemnify or replace the loss.
- amount of money that must be regularly paid to put the insurance in force
and keep it in force.
- amount of premiums charged by a company may be affected by factors
such as age, sex and in some cases, smoking habits.
- the higher the age, the lower the life expectancy. This results in a general
practice of charging higher premiums for applicants who are older.

DEATH BENEFIT - Amount payable upon the death of the insured. It is the
sum assured the beneficiary would receive in case the insured dies during
the protection period of the policy. It is usually equal to the face amount of
the policy, plus any additions payable upon death, less any loans and interest
taken on the policy.

LIEN - Done when the death benefit of a policy is restricted in amount

during the early years of the policy.

MATURITY is the time when the policy proceeds (or the Face Amount) are
paid if the insured has survived the maturity period or date of the policy
contract. Proceeds are called the MATURITY BENEFIT. After the maturity
benefit is paid, the policy terminates.

During maturity, Cash Values of the policy = to the Face Amount

CASH VALUES - Guaranteed amount received in case the plan is

terminated or surrendered prior to the death of the insured; called the Living
Benefit. Part of the cash values may also be taken out as a loanable amount.

These are the legal reserves or savings element of a policy. A policy

generally acquires cash values after the payment of three consecutive
annual premiums.

DIVIDENDS - Return of excess premium paid annually to the owner of a

participating insurance policy based on the insurer's performance and
experience over a given year.

THREATS SERVICE BENEFITS

Premature death Family Protection Death Benefit
Old age Retirement Income Maturity Benefit
Disability or Sickness Guaranteed Savings Cash Values
BENEFITS OF LIFE INSURANCE POLICY
C = Cleanup fund
RE = REadjustment Fund
FA = FAmily Dependency Income
L = Life Income for Window
E = Educational Fund
E = Emergency Fund
R = Retirement Income

Buying life insurance is buying peace of mind.