Learning Portal

Expand your financial knowledge through our curated terms and answers to frequently asked questions

 

 

Finance Terms

Asset 

Is any property you legally own regarded as having value and available to meet debts, commitments, or legacies (e.g. real estate, car, cash on banks, cash on investments).

Current Asset 

A type of Asset that is expected to be converted into cash within 1 year (e.g. cash, cash on banks, cash on investments). 

Fixed Asset 

A type of Asset that is long-term in nature and has depreciation value (e.g. real estate, car).

Liability

Any debt/legal obligation you need to compensate for.

Current Liability 

A type of Liability that is due within 12 months to the creditor (e.g. monetary debt with your friend).

Long-term Liability

A type of Liability that is generally not needed to be paid within 12 months (e.g. loan, lease, tax).

Expense

The corresponding cost required to purchase/do something (e.g. food expense, legal fee, insurance cost).

Fixed Expense

A type of Expense that has a fixed/consistent value (e.g. cellular plan subscription, monthly amortization).

Variable Expense

A type of Expense that has no fixed/consistent value i.e. volatile (e.g. automobile's gas expense, electricity bill).

Income

Is the money earned from any rendering of service i.e. employment, business.

Passive Income

Is a type of Income derived from an enterprise in which one is not materially involved (e.g. rental property, limited partnership, override income/commission from downline sales - multilevel marketing type of revenue/business model).

Active Income

Is a type of Income derived for which services have been performed (e.g. salary, commission) in which there is material participation.

Net Income (Income - Taxes)

Is the total amount of your Income after subtracting Taxes.

Net Worth (Assets - Liabilities)

Is an indicator of your stability. It is computed/measured by subtracting Liabilities from Assets. 

Inflation Rate

The rate at which the general level of prices for goods and services is rising. The average yearly inflation rate is at 2%.

Interest

The amount/charge for the privilege of borrowing money, typically expressed at an annual percentage rate.

 

Insurance Terms

Insurance

A financial product by which a company provides a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a premium.

Life Insurance

Also known as income protection benefit, is an insurance to the life of a person that guarantees a cash benefit when the insured dies.

Insured

The recipient of the benefits of a life insurance policy.        

Rider

Is an optional benefit, other than the life insurance coverage, that can be attached to a life insurance policy.

Beneficiary

The person/s who will receive the death benefit once the insured dies.

Sum Assured/Face Amount

The minimum guaranteed amount of money that beneficiaries will get when the insured dies.

Death Benefit

The total amount of money (either Face Amount or Current Account Value, whichever is higher) that beneficiaries will get when the insured dies.

Account Value/Cash Value/Maturity Value/Investment Fund

The current value of your investment, especially in a life insurance with investment (Variable Unit Linked) plan.

Policy Owner/Policy Holder/Payor

The person who pays for the premium of a life insurance policy.                 

Premium

The amount of money you're investing. It is the standard term for payment in life insurance, mutual fund, and life insurance with mutual fund (Variable Unit Linked) policies.

Premium Charge

Is certain percentage deducted from the premium that goes to the life insurance coverage. It is usually present on the first 3 years of paying period. This means that portion of your premium during the first 3 years is allocated for life insurance coverage.

Policy Lapsation

A status of a life insurance policy when premium is not payed within the deadline.                  

Policy Grace Period

The length, which is 30 days, in which a life insurance policy’s premium may still be payed beyond the deadline without interest or charges.

2-Year Incontestability Clause

A provision on a life insurance policy stating that any medical and death claim within the first 2 years of policy is not valid, on the ground of misrepresentation on the application.

Top-ups

Are additional investments, separate from the premium, that goes into the account value.

Waiver of Premium

A usual standard benefit of any life insurance policy in which future premiums are not needed to be paid if the insured is permanently and totally disabled and/or diagnosed with a critical illness.

 

Insurance FAQs

What are the requirements to get a life insurance plan?

You simply need to have good medical condition. However, you should declare all medical conditions on the application. Having a pre-existing condition doesn't always mean rejection of application. The usual average issue age (in which you are insured) is from 18-65 years old, and the usual average coverage of life insurance is up to 100 years old.

Will life insurance be paid for any cause of death?

Yes; however, suicide isn't acceptable if happened with 2 years from policy approval (see 2 Year Incontestability Clause).

Who can I declare as beneficiaries?

If you're married, preferably your legal spouse/children. If you're single, preferably your parents, siblings, and/or family members. It is important to consider that you have higher chances to dying early than your beneficiary/ies. Only family members by consanguinity are allowed to be declared as beneficiaries.

What are the types of beneficiaries?

Revocable (doesn't need consent when changes to insurance policy are made) and Irrevocable (need consent when changes to insurance policy are made)

Do beneficiaries pay taxes when they receive life insurance coverage? 

No, regardless of being declared revocable or irrevocable on the application. At the time of your death, your beneficiaries will receive, in lump sum amount, your death benefit/face amount/life insurance coverage or your investment's current account value (whichever is higher) tax-free.

Can I get life insurance plan in the Philippines when I'm overseas?

Yes; however, the signing on the application must be done in the Philippines.

What's the modern life insurance plan?

It's called Variable Unit Linked (VUL) Plan, in which portion of your premium goes to mutual fund in addition to life insurance. This means that you also have an investment in some fixed income securities and/or stocks, in which your money can earn cash value and grow on its own over a period of time.

VUL Plan: How long should I pay my life insurance plan?

The length of payment (for Variable Unit Linked Life Insurance Plan) can be done one-time, 3 years, 5 years, 10 years, 15 years, 20 years, or even continuous, as long as you want to. This varies per life insurance company. The generally recommended length is 10 years.

VUL Plan: How do I check the performance of my investment?

You can check the performance via online, specifically there's a customer portal from your life insurance company's website. 

VUL Plan: When can I withdraw my funds?

You can withdraw your funds/current account value anytime as you need, but it is highly discouraged and not practical to do so during the first 5 years of payment period, because there will be corresponding charges. In order to maximize the earning potential of your funds, look at your investment as a long-term commitment/perspective.

VUL Plan: How will my money grow on its own?

Your premiums are invested in mutual funds, which can be fixed income securities (e.g. government bonds, treasury bonds) or high performing stocks listed in the Philippine Stock Market (PSM) that are being managed by a Professional Fund Manager. The types of funds you can choose from are usually Bond Fund (low risk, invested in government securities), Balanced Fund (medium risk, invested in top performing stocks in the PSM), or Equity Index Fund (high risk, invested in the PSM and will directly reflect the performance of the PSM stocks).

VUL Plan: Are there corresponding taxes when I withdraw portion of my account value/cash value?

Fortunately, as of now, based on the Insurance Code of the Philippines, there are no stipulations requiring taxation of your withdrawals from insurance plans. Your life insurance amount/death benefit and account value/cash value, are all tax-free. However, there are taxes on withdrawals from bank accounts.

 

Investment Terms

Investment

A long-term by nature purchase of goods that are not to be consumed today but are used in the future to create wealth.

Holding/Lock-in Period

Period of time in which you must not withdraw your funds/account value, or else penalty/charges will apply. 

Top-ups

Are additional investments, separate from the premium, that go directly into the account value/investment fund.

 

Investment FAQs

Where can I invest my money?

The usual investment vehicles are stocks, mutual funds, unit investment trust funds (UITFs), insurance, real estate, and business.

What is a stock?

Is your ownership certificate of any company listed in the stock exchange. Similarly, a share, on the other hand, is the stock certificate of a company. holding a particular company's share makes you a shareholder/stockholder.

What is a mutual fund?

Is an investment vehicle made up of pool of funds collected from many investors for the purpose of diversification: investing in different securities such as stocks, bonds, money market instruments, and similar assets. It is managed by a Fund Manager. It is usually offered by companies.

What is a unit investment trust fund (UITF)?

Similar with a mutual fund, is an exchange-traded mutual fund offering a fixed and unmanaged (without Fund Manager)  portfolio of securities having a definite life.  It is usually offered by banks.

Is the growth of my investment in mutual fund/UITF/stock guaranteed?

No. Any investment to these instruments is a risk to take. Your investment's growth primarily depends on the economic performance of the country, the performance of the fund it is invested in, and the expertise of the fund manager (mutual funds/UITFs) or stockbroker (stocks).