PERSONAL FINANCE NOTES
LIFE INSURANCE
 insurance that pays out a sum of money either on
the death of the insured person or after a set
period.
 also known as life cover or life assurance is a way to
help protect your loved ones financially if you were
to die during the length of your policy.
LIFE INSURANCE POLICY - a contract with an
insurance company. In exchange for premium
payments, the insurance company provides a lump-sum
payment, known as a death benefit, to beneficiaries
upon the insured's death.
Typically, life insurance is chosen based on the needs
and goals of the owner. Term life insurance generally
provides protection for a set period of time, while
permanent insurance, such as whole and universal life,
provides lifetime coverage. It's important to note that
death benefits from all types of life insurance are
generally income tax-free.
BENEFITS OF LIFE INSURANCE
 LIFE RISK COVER - Life insurance provides you
with a high life risk cover that keeps you and your
family protected in case of an unfortunate event
 DEATH BENEFITS - You’ll have ultimate peace of
mind that when you pass away. Your family and
loved ones will have a financial safety net.
 TAX BENEFITS
 RETURN ON INVESTMENT - The money invested
will fetch good returns and will be returned fully as
sum assured either after the completion of the term
or after the demise of the insured.
 LOAN OPTIONS - Life insurance provides you the
advantage of taking a policy loan in case you are in
desperate need of money.
 LIFE STAGE PLANNING - Life insurance aids you in
life stage planning where you can plan your life’s
financial goals as per your convenience.
 RIDERS - Riders are the additional benefits that can
be bought and added to a basic insurance policy.
These options allow you to increase your insurance
coverage. Riders cover risks that are beyond the
scope of the main life policy, resulting in a more
comprehensive protection.
TERM LIFE INSURANCE POLICY - also known as pure
life insurance, is life insurance that guarantees payment
of a death benefit during a specified term.
TYPES of TERM INSURANCE POLICY
LEVEL TERM OR LEVEL-PREMIUM - policies provide
coverage for a specified period ranging from 10-30
years. Both death benefit and premium are fixed.
Fixed certain period
YEARLY RENEWABLE TERM (YRT) - policies have no
specified term but are renewable every year without
requiring evidence of insurability each year.
Early, premiums are low, but as the insured ages,
premiums increase. As age increases, premium
increases. Term life insurance policies provide a stated
benefit upon the death of the insured, provided that
the death occurs within a specific period.
DECREASING TERM - policies have a death benefit
that declines each year according to a predetermined
schedule. The policyholder pays a fixed, level premium
for the duration of the policy. As years passed by, Sum
insured decreases and premium increases/decreases
WHOLE LIFE INSURANCE
 provides coverage for the life of the insured.
 In addition to providing a death benefit, whole life
also contains a savings component where cash
value may accumulate.
 These policies are also known as permanent
or traditional life insurance
 Whole life can be used as an estate planning tool to
help preserve the wealth you plan to transfer to
your beneficiaries.
 Pay at a certain period of time; covers whole life
OTHER TYPES OF PERMANENT LIFE INSURANCE
VARIABLE LIFE INSURANCE - offers policyholders the
opportunity to put their cash value in an investment
account managed by the insurance company.
UNIVERSAL LIFE INSURANCE - it allows flexibility
with both your premiums and your death benefit. You
can skip some payments if you want, but you need to
maintain a minimum level of premium payment over
the year.
VARIABLE UNIVERSAL LIFE INSURANCE - provides
death benefits and cash values that vary in accordance
with the performance of a selected investment portfolio
(often shortened to VUL) is a type of life insurance that
builds a cash value
 The death benefit will be paid if the insured dies any
time as long as there is sufficient cash value to pay
the costs of insurance in the policy.
 Investment(stock market)+life insurance
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SURVIVORSHIP LIFE INSURANCE - These policies
used to be called “second-to-die” policies, so they were
an obvious candidate for re-branding.
These permanent policies insure two lives at once –
typically a husband and wife — and pay out when the
second person dies. A good choice for couples who
want to leave money to heirs only when both have
passed away.
SMART KEY TIPS FOR BUYING A LIFE INSULAR
1. DETERMINE WHETHER YOU ACTUALLY NEED
LIFE INSURANCE
 Most people do, but not everyone. If no one
depends on you financially, if you have no debt and
would leave an estate with enough cash to pay its
own taxes and expenses, you probably don’t need
life insurance.
2. CALCULATE HOW MUCH LIFE INSURANCE YOU
NEED
There are two important questions to ask:
 What financial resources will be available to
survivors after your death?
 What financial needs will your survivors have after
your death.
3. UNDERSTAND THAT LIFE INSURANCE IS
DESIGNED FOR PROTECTION
 Your main purpose for getting life insurance should
be to protect your beneficiaries financially in the
event of your death.
4. DETERMINE WHAT TYPE OF LIFE INSURANCE
BEST MEETS YOUR NEEDS
 Essentially, there are three types of life insurance
policies—term life, whole life and universal life. If
you need the insurance for only a specific period of
time, or are on a limited budget, a term policy,
which has lower premiums, may be a good fit. If,
however, you need the insurance for as long as you
live and want to accumulate savings, a whole or
universal policy may be a better choice.
5. ENHANCE YOUR COVERAGE WITH POLICY
RIDERS IF NECESSARY
 When you select a policy, ask your company
representative about the types of policy riders
that may be available to you. Riders or
endorsements are ways in which you can
customize your policy to meet your needs and
budget.
6. BUY FROM A REPUTABLE LIFE INSURANCE
COMPANY.
FINANCE NOTES
 Your life insurance policy is meant to financially
protect the people you love when you are no
longer here to do so yourself.
 Do some homework on the life insurance
company that you are considering buying from
and learn more about how to select a reliable
life insurance company
7. TELL YOUR BENEFICIARIES ABOUT YOUR LIFE
INSURANCE POLICY
 Once the policy is issued, inform your beneficiaries
the company that issued it, where to find the paper
copy of the policy and any specifics about what you
want them to do with the death benefit.
TOP LIFE INSURANCE COMPANIES IN THE PHILS.
1. SUN LIFE OF CANADA (PHILIPPINES)
 Founded in 1895, Sun Life Of Canada (Philippines),
Inc. is a subsidiary under Sun Life of Canada
(Netherlands) and offers services a wide range of
financial products: Insurance, wealth, and asset
management.
 These include financial services for education,
estate preservation, health protection, income
continuation, retirement, group life, and other
insurance products.
2. PHILIPPINE AXA LIFE INSURANCE, CORP.
 Founded in 1962, Philippines AXA Life Insurance
Corporation is a major player in the insurance
industry.
 Their products range from educational, health,
income protection, investments, and many others.
The company is headquartered in Makati City.
3. BPI-PHILAM LIFE ASSURANCE CORPORATION
 Established in 1933, the company used to be known
as Ayala Life Assurance Incorporated. It operates as
a subsidiary of Philippine American Life and General
Insurance Company, Inc.
 It offers a vast array of financial products which
include: savings, investment, educational fund,
retirement fund, personal accident, motor
insurance, income protection, and much more.
4. PHILIPPINE AMERICAN LIFE AND GENERAL
INSURANCE COMPANY, INC.
 Founded in 1947, Philippine American Life and
General Insurance Company, Inc. specializes in life
insurance and investment products which include:
protection, health and accident, savings, education,
and investment plans, as well as wellness programs
and financial plans.
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5. MANULIFE PHILIPPINES  Maxicare

 more popularly known here as Manulife, is a  Caritas
financial company that specializes in pension and
education, investment, medical, employee security,
corporate, student personal accident, credit life, SECURED LOAN one in which some item of value
and other insurance plans. backs the loan in case the borrower defaults on the
 Their Philippine arm is operating under Manulife loan.
Financial Asia Limited.  The item that secures the loan is called collateral.
6. INSULAR LIFE ASSURANCE COMPANY, LTD.  A lien is a legal claim to property to secure a debt.
 Founded in 1910, Insular Life Assurance Company, UNSECURED LOAN a loan backed only by the
Ltd. provides saving plans for education and reputation and creditworthiness of the borrower.
retirement; accident, health, disability, and payer’s  Unsecured loans are sometimes called signature
protection plans; and investment plans for Filipinos. loans.
 They also offer health, group protection, and
retirement plan services. They have strong
PRINCIPAL is the amount borrowed.
connections with the country’s 2,868 hospitals,
INTEREST is the amount you pay to use the principal.
outpatient facilities, and dental clinics. Their main
headquarters is located in Muntinlupa. FEES are other charges for the loan.
7. GENERALI LIFE ASSURANCE PHILIPPINES INC. FINANCE CHARGE is the total dollar amount to be paid
 Originally called Generali Pilipinas Holding Co. Inc., for the loan.
BDO Unibank Inc. acquired the company in 2016 TOTAL PAYMENT is the total amount a consumer
and is currently operating as a subsidiary of BDO must repay.
Unibank, Inc. PAYMENT is the amount the borrower repays each
 They offer a host of financial and investment specified period.
services that range from insurance, health,
education, and other financial services. OPEN-END LOANS
8. UNITED COCONUT PLANTERS LIFE ASSURANCE Credit Cards
CORPORATION (COCOLIFE) Lines of Credit
 Founded in 1966, UCPB Life Assurance Corp
specializes in life insurance underwriting. They also RISK MANAGEMENT
offer services for non-life, healthcare, mutual fund  Risk management for bankers is the practice of
products – covering protection, education, minimizing financial loss through effective
pension/retirement, and memorial insurance plans. policies.
9. FWD LIFE INSURANCE CORPORATION  Banks face risks in operations, credit, liquidity,
 FWD Life Insurance Corporation, also called FWD legal and regulatory compliance, and even
Insurance or FWD Life, is one of the fastest-growing marketing matters.
insurance firms in the Philippines.  Risk management policies include consideration
 Launched in 2014, it has the highest paid-up capital of the bank’s overall financial position, reserve
among life insurance companies in the country. requirements, cash flow, and ratio analyses of
 allows its customers to manage their policies on liabilities and assets.
their mobile devices through an app called Tapp.
NON-LIFE INSURANCE CREDIT-APPROVAL PROCESS
 Cars/Motors  Application
 House/Condos  Documentation
 Businesses  Processing
HMO - HEALTH MEDICAL  Underwriting
 If employed, the company will pay for it. o Collateral
 Hospitals (in patient) o Capacity
 Check ups (out pstient) o Credit reputation
 Intellicare  Closing
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 Funding
ANALYZING CREDIT
 CONSUMER REPORTING AGENCIES - a company
that compiles and keeps records on consumer
payment habits and sells these reports to banks and
other companies to use for evaluation
creditworthiness
o Consumer reporting agencies are sometimes
called credit bureaus.
o The three largest CRAs
 Equifax
 Experian (formerly TRW)
 TransUnion
 CREDIT-SCORING SYSTEMS – can provide an
efficient and unbiased method of evaluating credit
o These scores place a numerical value on the
performance or status of an applicant in various
categories
 Credit Reports include personal data, accounts
history, delinquent accounts, public records,
inquiries
FICO (FAIR ISAAC CORP) - credit-scoring system
developed by Fair, Isaac and Company, Inc. has become
the dominant credit-scoring system
 FICO SCORE is a three-digit number that credit
granters can use in making a loan approval
decision
 FICO CRITERIA
o Payment history (approximately 35 percent)
o Amounts owed (approximately 30 percent)
o Length of credit history (approximately 15
percent)
o New credit (approximately 10 percent)
o Types of credit (approximately 10 percent)
CREDIT COSTS - Annual percentage rate, Minimum
payments, Term
REVIEWING APR AND FINANCE CHARGE - The APR
is a key aspect of comparing credit costs.
 Sum-of-digits method
 Previous balance method
 Adjusted balance method
 Average daily balance method
MINIMUM PAYMENTS
 Most credit cards require a minimum payment
every month.
FINANCE NOTES
 Minimum payments are usually 2 to 5 percent of
the unpaid balance.
 Paying the minimum payment keeps the account in
good standing, but it does not reduce the principal
much.
TREND TOWARD LOWER MINIMUM PAYMENTS
 Increase bank profits
 Contributes to greater consumer debt
TERM
 For installment loans, length of term also affects the
total finance charge.
 Repaying the loan over a longer period
o reduces the monthly payment
o increases the total payment for the loan
THE IMPACT OF CREDIT
 Overextension
 The role of banks
 Credit counselling
LOANS AND INCOME
 Loans have a direct impact on a bank’s income,
because the interest charged is its major income
source.
 Approving questionable loans could lead to default,
or failure to repay a loan, and, in turn, to lower
income.
 A bank’s income depends on how well it manages
its loans.
LOANS AND LIQUIDITY
 LIQUIDITY means having the funds to meet a
bank’s obligations when required.
o Loan term
o Interest rate
o Loan type
o Collateral
 LIQUIDITY RISK refers to the risk that a bank will
have to sell its assets at a loss to meet its cash
demands.
CREDIT AND MARKET RISK
 CREDIT RISK - the bank’s estimate of the
probability that the borrower can and will repay a
loan with interest as scheduled.
 MARKET RISK - the risk that an investment will
decrease in price as market conditions change
 PERSONAL FINANCE NOTES

LOAN DECISIONS AND TRADE-OFFS

Knowing how to analyze the loan term, interest rate, as
well as other factors, helps determine the profit a bank
can make from its loans

LOAN POLICY COMMITTEE

 All banks must have a lending policy, a written
statement of the guidelines and standards to follow
in making credit decisions.
 A bank’s board of directors through membership on
its loan policy committee sets its lending policy.

EXAMPLES OF LENDING POLICY

 Minimum credit standards for new loans
 Process used to check applicants’ credit history
 Documents required as part of the application
 Interest rate for various loan types and risk
 Bank’s loan mix
 Treatment of past-due and delinquent loans