Advice on mistresses, wives, jueteng lords & smugglers

Rather go to bed supperless than to rise in debt.  Benjamin Franklin

Thanks a lot to the many readers for their letters on investments, personal finance and life insurance. One letter by Valerie Roberto of Parañaque City asked about mistresses. This writer wishes to clarify that despite our reply purely on financial considerations, we do not condone or encourage infidelity and extramarital affairs of any kind.

I believe that all women  legitimate wives and illicit mistresses included  should have a nest egg or personal savings for her sense of security. It is sad that we hear not a few tales of women married to rich or powerful but irresponsible men who can’t leave their battered or sour relationships because of a lack of financial independence. Money is not just about creature comforts or luxuries; money ultimately affords us freedom. I urge all women  whether housewives or even mistresses  to not only be gainfully employed but also find ways to save money for rainy days. The goal of savings and insurance is financial security.

Here are some readers’ questions and expert advice from the officials of the Philippines’ respected and 100-year-old Insular Life:

Question 1: Can MIStRESSES, Jueteng lords, Politicos & Smugglers be insured?

In past columns you’ve tackled why mistresses cannot be life insurance beneficiaries, but can they be insured with their boyfriend as payer? What about people in illegal professions like jueteng lords or smugglers, can they buy life insurance, too? Is it true that politicians also cannot get life insurance? Can you ask Insular Life to give us a list of various professions that they do not like to insure and why?

Valerie Roberto, 28 years old, Parañaque City

Answer 1:

I believe that, just like other people, mistresses can be allowed to secure life insurance for themselves subject only to the risk evaluation and underwriting requirements of the life insurance companies. Their health, occupation, lifestyle and other particular circumstances will be major factors in the assessment of risk, if any.   For that matter, politicians may be insured also, as in fact many of them are, but again subject to the same risk evaluation and underwriting requirements. On the other hand, life insurance applications from persons engaged in illegal activities like jueteng lords and smugglers will most likely be declined on account of the higher risk of their activities. 

Due to the varying risks brought about by different individual circumstances, we cannot provide you with a list of professions or activities that are insurable or not insurable. Each of these is individually evaluated and cases not considered standard may still be covered subject only to applicable underwriting ratings or other conditions commensurate to the risk involved. Of course, those applications from persons who are really exposed to unacceptable risks are either deferred or declined as may be applicable.

In relation to your first question, you were also asking if mistresses can be insured with their boyfriend as payer or policyholder. In reply, I think that generally, no insurance policies are issued in cases where there is only a “boyfriend-girlfriend” relationship between the insurance applicant and the proposed insured, unless the presence of “insurable interest” can be established on the part of the boyfriend on the life of the said mistress.   This means that we have to find out if, in the existing relationship of the parties, there is reasonable expectation that the boyfriend will derive pecuniary or financial benefit or advantage on the continuance of the life of the mistress or if the said boyfriend would suffer pecuniary or financial loss or damage on account of her death or injury. The interest must therefore be in favor of the continued life of the proposed insured and not in its loss or destruction. Otherwise, any insurance that may be issued in the absence of such “insurable interest” would render that insurance void since it would constitute as wagering on the life of the proposed insured. The Insurance Code, in its Section 10, enumerates the situations where there is insurable interest that would allow insurance coverage, as follows:

“Section 10. Every person has insurable interest in the life and health:

1) Of himself, of his spouse and his children;

2) Of any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest;

3) Of any person under a legal obligation to him for the payment of money, or respecting property or services, of which death or illness might delay or prevent the performance; and

4) Of any person upon whose life any estate or interest vested in him depends.”

Atty renato S. De Jesus, Insular Life Vice President and Head of Legal Affairs

Question 2: Why not insure our lives, Since we all insure our cars?

I support your advocacy of promoting life insurance awareness in the Philippines, because we should ask: Are you and your life less valuable than a car, since by law you are required to insure your car with third-party liability? Why do most people not buy life insurance when the repercussions of death are so much more than that of the losses in a car? My elder brother died in 1997 at only 43 years old and he had life insurance, so it was good for his family because he was also a believer in the importance of life insurance. I suggest people learn how to manage their wants and priorities; are our expenses necessities or not? Life insurance is a necessity for all. Come to think of it, an iPad can pay for one year’s life insurance premium for a young person under 30 years old.

Johnlu Koa, 52 years old, married, founder & CEO of French Baker, Inc., Mandaluyong City

Answer 2:            

Mr. Koa, thank you so much for supporting our advocacy of financial preparedness and security through life insurance. You have correctly pointed out yet another of life’s ironies: our lives are more valuable than any of our material possessions but we would rather insure the worth of our cars and houses than ourselves. Yet it is our ability to create/earn income for our loved ones that enables us to acquire all our worldly goods. 

In my many years in the life insurance industry I have come to the conclusion that the principal reason why many Filipinos are still not insured is because they have not been properly educated on the meaning and importance of financial risk management. I believe this is why many of them don’t see the value of life insurance. The most common misconception is that life insurance is a needless or even unaffordable expense. This is simply not true! 

First, it is not an expense but a financial instrument that accumulates money through the years wherein it inevitably comes back to the insured or his family in an amount greater than what has been put in, and if time runs out before the intended financial goal (represented by the sum insured or face amount of the policy) is attained, the insurance company will complete the balance (which no other financial institution can do). Second, there are so many life insurance products today that are quite inexpensive. It only takes less than what a person would spend monthly for his cellphone load to have some amount of life insurance coverage. 

You are entirely correct in saying that it is a matter of managing one’s wants and priorities, and this is precisely the mission that Insular Life is determined to play a major role in pursuing  to make more Filipino income earners understand and appreciate how to balance their financial activities with the right priorities on expenses, savings and investments while effectively managing the risks and uncertainties of life through insurance.   

Jesus Alfonso G. Hofilena Insular Life Executive Vice President and Head of Sales & Marketing Group

Question 3: Is life insurance still reliable after the troubles of AIG, CAP & PACIFIC plans?

I’ve been offered life insurance, but I feel it’s no longer reliable. I feel that depositing my savings in the banks might be safer due to the government’s PDIC guarantee. I read about AIG in the US having troubles a couple of years ago, and local firms like CAP and Pacific Plans. I want to also ask if the many victims of CAP, Pacific Plans, etc., can ever get justice or their money back?

Atty. Floro Q. Casas, 31 years old, married, Placer, Masbate

Answer 3:

The problems CAP and Pacific faced are not related to the life insurance industry. Both had problems with their pre-need companies, which sold open-ended pre-need education plans. Open-ended pre-need education plans are securities that guaranteed the college education of a child regardless of the cost of education. This model worked during the time when tuition fee increases were regulated by the Dept of Education. However, when tuition fee increases were allowed to operate under free-market pricing (meaning, schools can increase their tuition fees at rates which their target market is willing to pay), CAP and Pacific found themselves holding on to contracts that provided guarantees difficult to estimate.

As for AIG, their troubles are rooted in their non-traditional investment division, which provided guarantees to sub-prime assets. Their life insurance operations per se were not problematic. However, since both belong to the AIG conglomerate, the insurance operation was likewise affected.

Allow me now to tackle the most important issue you raised: the reliability of insurance. The concept of insurance is all about risk protection, management thereof and eventual transfer of that risk to mitigate the potential effect on your person. If you choose not to secure an insurance cover, you choose to absorb the full effect of the risks you are exposed to. Such risks could involve dying too soon, dying too late, loss of economic value due to disability or poor health, loss of income due to accidents, etc. Insurance companies provide the means for the transfer of such risks from an individual/organization to an insurance company, which is in a financial position to absorb the impact of said risks. In other words, you get insurance so an institution with more financial capability than yourself can share or absorb the risks you are exposed to.   Insurance companies continue to be reliable. Even in the aftermath of several financial crises, the latest of which was the sub-prime, these insurance companies continue to operate and fulfill their contractual obligations.

Should you or should you not transfer risk? I believe it makes sense for anyone to do so since most of the risks we are exposed to are real. The key is to choose the insurance company you will entrust your hard-earned money to. Insular Life has 100 years of uninterrupted operations in the Philippines. It was the only insurance company that stayed open even during World War II to serve the needs of its policyholders. The company will turn100 on Nov. 25, proof that Insular Life remains relevant to the present generation.

Amelita F. Tamayo Insular Life First Vice President and Head of Marketing & Agency Services

Question 4: Is it better to invest money ourselves or rely on hedge funds, etc.?

Many of us in Cebu read your column and Philippine STAR. My question: is it better that we personally study and invest our money, or should we rely on hedge funds or other entities to invest our money even if we don’t know about them? On insurance, my family is a victim of CAP; we lost money on two pre-need education plans we bought. What happened to this case? I believe in your advocacy of promoting life insurance with Insular Life and Philippine STAR, because our father died in 2001 of a heart attack at 60 years old, and the life insurance money we got helped our mother with funeral expenses and expanding our family businesses. 

Catherine Salimbangon, 26 years old, married, president of Organique Acai Drink, Cebu City

Answer 4:

There is a certain minimum level of understanding that is required from investors in order to minimize the possibility of placing hard-earned money into questionable investment outlets. Basic finance concepts like the correlation of risk and rewards, time value of money and how investment returns are derived should be part and parcel of the decision making process whenever we consider making an investment. After we have satisfied the standards we have set for ourselves in terms of expected returns and the risk we are comfortable to assume, we can then pass on the implementation on these objectives to professional money managers or by choosing appropriate products/services provided by financial institutions.

Alijeffty C. Gonzales Insular Life Senior Assistant Vice President Business Development Officer

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Questions or other feedback are welcome at willsoonflourish@gmail.com, my Facebook page or Twitter: WilsonLeeFlores. All letters will be answered.