Monday, March 28, 2011

Life Insurance

They say life is a series of probabilities. Probabilities that things may or may not happen. But life itself is not taken as probabilities. Life is certain. Growing old and death are the two certainties of life. And between the two, death is the most certain thing that will happen. The only question is when?

Life insurance does not replace a man’s value. Life insurance does replace a man’s economic value.

There are two distinct advantages of life insurance – gradual accumulation of wealth and forced savings.

The services of life insurance are as follows:

1. Family Protection

2. Income Replacement

3. Clean-up Fund

4. Guaranteed Savings

5. Retirement

6. Education

7. Mortgage Redemption

8. Estate Conservation

9. Investment

The Factors of Insurability are as follows:

1. Health History

2. Present Health Condition

3. Family Health History

4. Occupation

5. Residence

6. Moral Practices

7. Avocation

There is what they call a contestability period (which is seldom discussed by the agents to their clients) for the first two years of the coverage. This means that the insurance company has the right to reject claims if it has been proven that the cause of death is due to a pre-existing condition that has not been declaired by the client.

The 4 settlement options are as follows:

1. Interest Option

2. Fixed Period Plan

3. Fixed Amount

4. Life Income or Annuity

The beneficiary is anybody who has insurable interest. Most of the times first degree family members are the beneficiaries.

The declinable areas (no insurance coverage) are as follows:





South Africa








In the Philippines the declinable areas are:




Some things to note:

1. How much coverage should I get? Rule of thumb is annual income times 10.

2. There is only one type of insurance and that is what we call term insurance.

3. Insurance is a business. Therefore there is no free insurance.

4. Riders are additional benefits on top of the coverage and these are not free either.

5. The insurance company has the right to deny you a coverage once they see that you have high risk e.g. very ill.

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