On disinheriting a wayward kid and illegitimate siblings

If you would be wealthy, think of saving as well as getting. — Benjamin Franklin

My problem lies in reconciling my gross habits with my net income. — Errol Flynn

The only way not to think about money is to have a great deal of it. — Edith Wharton

Today, July 13, is the birth anniversary of one of the greatest leaders in world history whom I admire, the Roman political and military leader, gifted Latin writer and orator Julius Caesar. He was a remarkable genius. Caesar is a role model of world-class excellence and visionary leadership for entrepreneurs and other people of our modern era. He was born on this date in the year 100 BC.  

Caesar once said: “We have not to fear anything, except fear itself.” Perhaps this line was the inspiration for also-great US President Franklin Delano Roosevelt when he uttered during the Great Depression: “The only thing we have to fear is fear itself.” I agree!

Last week, global stock markets slowed down due mainly to disappointing unemployment statistics from the recession-hit economies of the United States and Europe, thus raising doubts in the minds of many investors and business people that global economic recovery will happen soon. In these uncertain times, we need strong and selfless leadership not only from our politicians, but also from business, civic and other leaders of our society. We need to strengthen the Philippine economy through massive infrastructure investments, innovativeness, higher levels of productivity and savings.

I strongly believe one of the best ways to boost the economic foundations of the Philippines is to promote a national culture of savings, such as through traditional bank deposits, life insurance and others.  

One example of how mobilizing savings can vigorously support economic development is the country’s largest and most profitable homegrown life insurance giant, Insular Life, recently extending P1.25 billion to top corporations such as P 300 million to Ayala Land in February, P500 million to telecommunications giant PLDT in March, and P250 million to Globe Telecom and also Cebu Energy Development Corp. (CEDC) in June. Insular Life’s loans support these prime corporations’ ongoing expansion programs, which help create new jobs and generate more economic activities. The CEDC is now completing its 246-megawatt coal-fired plant in Toledo, Cebu.

What better, stronger, more financially sound and well-managed life insurer to trust than Insular Life, which in 2008 reported P4.2 billion in investment income, and a consolidated net income of P2.1 billion? These are amazing accomplishments during these uncertain times of global recession!

We continue the partnership of The Philippine STAR and Insular Life in this question-and-answer series on insurance, personal finance and money concerns, hoping to encourage everyone - professionals, students, housewives, entrepreneurs - to save and secure our loved ones’ future. Here are some more readers’ questions and Insular Life executives’ responses: 

Question 1: Can parents remove a disobedient kid from their insurance beneficiaries list?

Please just call me Vanessa. I’m a college student. Our close family friend has a daughter who is stubborn and still going steady with a boyfriend the family hates and does not approve of. Can her parents disown her and also take her out of their life insurance beneficiaries list because they know the boyfriend is only after her money?

Answer

Vanessa, your question may have some personal dimensions to it that I think we are not at liberty to delve into. So we will just limit our comments to your question on whether or not a designated beneficiary can be “taken out” or removed as such beneficiary in a life insurance policy. In answer to this, the law gives the policyholder the right to change the beneficiary he designated in the insurance policy unless he, the policyholder, has expressly waived this right in said policy. Such waiver is what is commonly referred to as “irrevocable designation” of a beneficiary. This means that the policyholder cannot do anything with the policy (e.g., apply for a policy loan, surrender the policy for its cash surrender value, including changing the beneficiary, removing an existing one or adding a new beneficiary, among others) without the prior consent of the irrevocably designated beneficiary. Although restrictive, an irrevocable beneficiary designation is intended to address certain tax issues.

Atty. Renato S. de Jesus

Vice President & Head

Legal Affairs Coordinating Office

Question 2: Is a will absolute in the Philippines? Can illegitimate siblings be excluded?

I’m Monica, an executive in a top multinational firm here in Makati City who always reads The Philippine STAR because of the first-rate Lifestyle and Entertainment sections, plus your columns, which impress me with all the varied topics. Is a deceased person’s will valid and absolute in the Philippines, like that of a person bequeathing his fortune to his cat or even a mistress regardless of circumstances? Can our family exclude our dad’s illegitimate kids from the will? How can life insurance help out in a person’s will and estate, if ever? Thanks for your columns and these refreshing, eye-opening questions and answers about money matters. 

Answer

Monica, as you know, a will is one of the ways by which a person is allowed by law to control to some extent the disposition of his estate upon his death. So long as the will is made in accordance with the formalities required by law as well as the other prescribed conditions, the same shall be valid and binding. Among the conditions required by law is that only those persons who are incapacitated by law to succeed may not inherit. Included in this prohibition are those dispositions made between persons who are guilty of adultery or concubinage.  

As regards your query on whether your family can exclude your dad’s illegitimate children from the will, the same cannot be done since the act of making a will is a personal act on the part of the testator (the person making the will). Besides, illegitimate children are among the compulsory heirs under our law on succession who are entitled to a share in the legitime (that part of the testator’s property which he cannot dispose of as the law has reserved this for the compulsory heirs).

The transfer of property (the estate) by way of succession is subject to estate tax. It is here where, with a minimal amount of premiums, an adequate life insurance could help reduce, if not avoid, the substantial impact of the said tax on the estate.  

Atty. Renato S. de Jesus

Questions 3, 4 & 5: Why are people in some occupations (like sports) charged higher insurance premiums?

I am 41 years old, married with three young kids. I commend your columns and The Philippine STAR for encouraging the public to save money. My question is, what can life insurance companies like Insular Life do to offer this good product to the 120,000 men and women of the Armed Forces of the Philippines who serve and protect our national security, the bulk of whom are in their early 30s? Can the insurance rates of soldiers be not too expensive? -Lt. Colonel Romeo S. Brawner, Camp Aguinaldo, Quezon City

I read your columns in The Philippine STAR. I am vice president and chief operating officer of Bombo Radyo Philippines, and president of the Kapisanan ng mga Brodkaster sa Pilipinas (KBP). We have over 700 TV and radio stations nationwide. Is it true broadcasters have higher insurance rates, and why? -Herman Z. Basbano 

My husband Timmy and I are a young couple with two children; we have a good life. However, my husband is adventurous and has this tendency to go into risky sports like mountaineering and even occasionally racing cars. Will his engaging in such sports increase his life insurance rate? Our family - including all my sisters and cousins - has been reading your columns for a while; you make business topics seem less boring. - Geraldine Mercado-Enriquez, Zamboanga 

Answer

The premium rates for life insurance products are based on the life expectancy of a group of lives of a certain risk profile. Not all applicants for insurance would belong to the risk profile upon which the premium rates are based. Some applicants would have higher expected mortality due to their physical or health condition, occupation, avocation, or some other risk factors. 

In determining the appropriate premium rate for each applicant for insurance, the principles of adequacy and equity are applied such that the total premiums received will be adequate to pay for the total benefits to be incurred, and the premium paid by each insured life will be commensurate to the degree of risk presented by such insured life. This is the reason why applicants with certain medical conditions (for example, hypertension or diabetes) may be charged additional premiums. This is also the reason why applicants with certain occupations (for example, military personnel or media broadcasters) may be charged additional premiums. Similarly, applicants with certain avocations (for example, scuba diving or sky diving) may be charged higher premiums. Through proper risk selection and risk classification, life insurance protection is made available to a wide range of risk types at a price commensurate to the type of risk presented.   

We have an array of products available to military personnel as well as to media broadcasters, depending on whether the need or purpose of insurance is for protection, savings or investment. Since you are in a high-risk occupation, you would normally need a product to protect the financial security of your loved ones in case anything happens to you. In addition, you may also want a savings product for your children. If you purchase life insurance for your children, then the additional premiums for high-risk occupation will not be applicable, because your children are the insured. If what you want is an investment product, the mortality risk component will be much lower than for a protection product, thus the additional premium will most likely be a small proportion of the total premiums you will have to pay.

Our financial counselors will be able to assist you in evaluating the most appropriate and affordable program to suit your needs and/or objectives. 

Mona Lisa B. dela Cruz

Senior Vice President & Head

 Administrative Operations Group

Question 6: Would you recommend an additional policy for someone who already has life insurance?

I am Inez Reyes, co-CEO of Reyes Barbecue, and my husband and I have some questions for your very enlightening series on life insurance and finance topics. If I’m 47 years old, with two young children, already have some life insurance and can afford P24,000 a year for an additional insurance policy, what kind of policy would you recommend I get and why?

Answer

It really depends on your objectives for buying additional insurance coverage. In general, life insurance policies are designed to provide family protection, savings for one’s retirement or the education of one’s children, and lately, insurance products also have investment components. Insular Life has several types of policies under its portfolio that one can buy depending on his current needs. A low premium but high coverage is best for protection, while an endowment that gives anticipated payments periodically and early maturity is best if your objective is to save a specific amount. We also have investment products that will give maximum investment returns through the years.  

My advice to you, however, is to determine whether your existing insurance coverage is sufficient for your family’s future needs. And this we can do better if we sit down and discuss your overall insurance needs. Please feel free to contact me at 926-1357 and 926-1355, at your most convenient time and I will be happy to discuss this in greater detail

Roger Tan

District Sales Manager

Quezon Ave. District Office

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For more inquiries, or if you want to schedule a Wealth Management Forum for your group, call Insular Life’s Brand Marketing Department at 582-1818 loc. 1850 and 5124 or e-mail brand@mx.insular.com.ph or visit website: www.insularlife.com.ph.

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Thanks for your letters, all will be answered even if not all can be published due to space limitations. Questions, suggestions or comments are welcome atwillsoonflourish@gmail.com or at my Facebook account.