One way for you to earn credits in The Sun Garage is by servicing the cars in the shop, you

can
start by changing the oil. You will be able to change the oil by learning the basic definition of
Premiums.

To ensure that the Policyowner receives the protection provided by the insurance policy, the
initial premiums must be paid. This puts the policy in force. Keeping it in force is contingent on
the payment of subsequent premiums.

Subsequent premiums are also called renewal premiums. These may be paid on the Annual,
Semi-Annual, Quarterly or in some cases Monthly modes. However, since interest is lost by not
having the full premium in advance the total of 12 monthly premiums, 4 quarterly premiums or 2
semi-annual premiums are higher than that of the annual premium.

Good Job! You have succesfully changed the oil, you receive 500 credits

BASIC FACTOR THAT AFFECT PREMIUMS

Mortality
Life Insurance is based on the accurate prediction of mortality and this is what we call the
mortality factor. Through the use of Mortality tables which are firmly rooted in the Law of Large
Numbers and Law of Probability. Life Insurance companies project mortality or life expectancy
of an individual, the general rule is the higher the age, the lower the life expectancy. This affects
premiums in such a way that a higher age usually means higher premiums.

In developing a life insurance policy, the insurer also must accumulatefrom premium payments a
fund required to meet the contract obligations. This fund is called policy reserves.

Interest
When a premium is paid, it is combined with other premiums and it is invested to earn interest.
Since the company expects to earn this interest, it passes this along to the policyowner thus
reducing the premium.

Expense
There are a number of operating expenses involved in the business of life insurance, Office
Space, Utilities, Administrative Costs, Sales Contests, Promo's and Marketing Expenses, Salaries
of employees, Commissions of advisors and the like. Thus non-productive advisors in a company
can negatively affect the Expense component of the premium.

Each individual premium has to carry a small portion of these normal costs so that the factor of
expense is computed and built into the policyowner's premium rate. The expense factor is also
called loading. In some cases companies add a safety margin requirement to the expense factor to
handle uncommon events that may increase mortality experience such as natural disasters or
calamities.

Gross Premium vs. Net Premium

The Premiums to be charged are then computed using the statistics related to mortality, the
interest rates on investments and the projected costs of expenses using Actuarial Science by
Actuaries involved in the development of Insurance Products and computation of premium rates.

From the different factors Actuaries compute the Net Premium, which is equal to Mortality plus
Interest. From the Net Premium Actuaries can derive the Gross Premium, by adding the net
premium plus the expense, which may include other factors such as the safety margin
requirement. This Gross premium is the amount of money charged to the applicant.
Good Job! You have succesfully repaired the engine of the racecar you receive 500 credits

2 Types of Premium
You have 1,000 credits so far, you need to earn 500 credits more, you can earn this by replacing
the tires on the race cars. To do this you need to learn the two types of premiums, Natural and
Level premiums.

Natural Premiums are premiums which increase yearly with the rising rate of mortality. If
insurance is to continue, it must be renewed every year, this type of premium may be relatively
inexpensive at the onset however the mortality in later years results in very high premiums

Level Premiums on the other hand remain at a constant level from the beginning to the end of the
policy in effect for a number of years.

Depending on the type of plan, life insurance companies may offer products with natural
premiums and level premiums.

Good Job! You have succesfully replaced the tires of the racecar you receive 500 credits
Great work! Because of the hours you put in, helping around in the garage, you have succesfully
earned 1,500 credits! These credits can get you in the Motorama races if you buy a car you can
use.

Your 1,500 credits can buy you any of the Class C racing cars, please select the car of your
choice.

Basic Plans
Classification according to Nature
The car you have chosen is ready to go. You can join the Class C racing class, this is the entry-
level circuit for the beginners in Motorama racing. This race is fairly easy, to win it all you have
to do is learn the types of basic plans classified according to nature.

According to the nature of their features, life insurance plans can be classified either as
Temporary, also known as Term plans, or Permanent Plans

Temporary or Term Plan

Temporary Insurance more commonly known as Term insurance provides protection only as
death benefit. It does not offer living benefits because it has no savings or cash values.

Just as some people prefer to rent a house or apartment rather than buy a home, some individuals
choose to have temporary life insurance protection. The key point is, term insurance covers only
temporary needs. It covers the insured usually for a short term, or a specified period of time, in
most cases 1 year or 5 years. These type of plans have the most affordable premiums.

Term plans are RENEWABLE and CONVERTIBLE

They can be renewed after their coverage period, if the plan is for 1year or a yearly renewable
term the policyowner may choose to extend the coverage for another year for a higher premium,
since term plans have Natural Premiums.Usually the renewal can be done continuously up to a
specified age. Since the renewal of term life plans present an increased possibility of
Antiselection it is customary for the company to charge higher rates for renewable plans than
those that are not renewable.
Term plans are also convertible, which means it can be converted to any permanent plan,
anytime while the policy is in force.

The benefit of a term plan's renewability and convertibility is that it can be done without
showing any proof of insurability.

Due to its short-term nature, term plans are commonly used to secure loan against risk of death.

Types of Term Plan

There are two basic types of term plans, Level Term and Decreasing Term.

Level Term is a type of term plan in which the death benefit remains constant over the term of
the coverage.

Decreasing Term is a type of term plan in which the death benefit starts at the set face amount
and then decreases over the term of the coverage, by the end of the term period the death benefit
is reduced to zero.

Permanent Plan
Permanent Plans of Insurance are called such since they offer longer period of protection, even
lifetime protection. This plan combines protection and savings, which is made possible by the
build-up of cash values. When the owner of a permanent life insurance policy pays a premium,
part of it goes to the build up of cash values.

Permanent Plans use the Level Premium system, which means the premiums do not increase
over time but remain at the same level for which it was purchased at inception. This enables
permanent plans, specifically Whole Life Plans to offer protection at the least annual cost over
the period of protection.

Types of Permanent Plans include Whole Life Plans and Endowment Plans

Whole Life Plan & Limited Pay Plan

The most basic form of permanent life insurance is the Whole Life or Ordinary Policy It has
three distinguishing characteristics:

Lifetime insurance protection, it provides protection up to age 100

Lifetime premium payment, premiums are payable up to age 100

Maturity at age 100, the cash values equal the face amount at age 100 making the maturity
benefit available.

TRIVIA: Dr. Brain says, did you know that a whole life policy with an initial premium rate that
applies to the first 5 years of the policy and a higher premium rate that applies to the remainder
of the premium payment period is known as a modified life policy.
Endowment Plan
Endowment policies are ideal for those who want their life insurance cash values to grow very
rapidly to build a fund that will be available at a certain time for a definite purpose - retirement,
for example, or at a time a child enters college or when an obligation becomes due.

Endowment policies provide protection in the form of the death benefit for a limited period, but
also offer the highest form of savings in a specified period.
Endowment plans have premiums that are generally higher than that of Term, Whole Life and
Limited Pay Life Plans
Types of Endowment Plan
Regular Endowment

There are many different types of Endowment Plans, Regular Endowment, Pure Endowment and
Anticipated endowment, just to name a few.

Regular Endowment provides protection in the form of the death benefit and matures either after
a specified number of years, what we call term-based, for example 20 year endowment, or it may
mature at a specific age of the insured, what we call age-based, for example endowment at age
65
Pure Endowment
A Pure Endowment is a type of endowment which promises to pay the face amount only if the
insured survives up to the end of the specified period, and nothing will be paid if death occurs
before the end of the period.
Anticipated Endowment
In an anticipated endowment, the policyowner does not have to wait for the maturity date of the
endowment before he receives a portion of the face amount.

For example, the policyowner may receive 20% of the face amount 15 years before the maturity
date, another 20% 10 years before and another 20% 5 years before. At Maturity, 40% of the face
amount becomes payable

Special Anticipated Endowments or SAE will give you 100% at the maturity aside from three
payouts of 20% each
Congratulations you won the Class C Beginner level Race! Because of your win, you are
awarded 2,500 credits, which you can use to buy a car to race in the Class B Advanced Level.

Your 2,000 credits can buy you any of the Class B racing cars, please select the car of your
choice.
Classification according to participation
The car you have chosen is ready to go. You can join the Class B racing class, this is the
advanced circuit for the drivers with more experience. This race is challenging, to win it all you
have to do is learn the types of basic plans classified according to participation.

Insurance policies sold are either Participating or Non-participating

Participating
Participating policies are sold by both stock and mutual companies, which may also sell non-
participating policies.

In participating policies the policyowner shares in the dividends or the surplus for distribution.
Due to this, premiums of participating policies are higher than that of a non-participating policy.
Non-participating
Life insurance companies may also sell plans which do not participate in the share of the
dividends. These plans are called non-participating
Whew that was fast! Congratulations you won the Class B Race! Because of your win, you are
awarded 4,000 credits, which you can use to buy a car to race in the Class A Expert Level.

Your 4,000 credits can buy you any of the Class A racing cars, please select the car of your
choice.
Classification according to Coverage
The car you have chosen is ready to go. You can join the Class A racing class, this is the
advanced circuit for the drivers with more experience. This race is extremely challenging, but
you have the driving skills to win it all you need to do is learn basic plans classified according to
coverage

In this classification the focus is the number of lives covered under the life insurance policy.
Individual
The first type of plan classified according to coverage is the individual policy, these policies
provide protection to one person hence the name There is only one Insured in this type of plan.

Individual policies are also called Ordinary insurance since these are payable annually, semi-
annually or quarterly basis.

Individual policies may also be paid on a monthly basis through payroll deduction in the form of
Salary Savings insurance.
Joint
The second type of plan classified according to coverage is called joint life insurance. Joint Life
plans provide protection to two or more persons, allowing a single plan to have 2 or more
Insureds.

The basic joint life plan pays the death benefit to the beneficiaries at first death, which means
upon the death of any of the insureds, after proceeds are paid out the policy terminates.

Joint and Last Survivor insurance on the other hand extends coverage until the last person being
covered in the policy dies.
Group
The third type of classification according to coverage is the Group Life plan. This type of plan
provide protection to a group of people, such as employees of a company.

In this case the policyowner is the company and the insured are the employees of that company,
and most group policies pay dividends to the employer. A Group policy covers death due to
natural or accidental causes whether during office hours and in the place of employment or
outside the job.

A single master policy covers the entire group, and the group members do not receive a policy
but receive individual insurance certificates.

A covered employee who terminates his employment continues to be covered for 31 days after
the termination date during this period he can exercise his conversion privilege and convert his
coverage to an individual policy without evidence of insurability.

In most companies, the agent's role in marketing group life insurance is limited to securing the
necessary appointment for the home office group marketing people.
Contributory vs. Non-contributory
Group policies may either be contributory or non-contributory

In a contributory group policy, the employer and employees share in the premium payment. At
least 75% of the group members must be included in the plan.

In a non-contributory group policy, the employer pays for the entire premium. 100% of the group
members must be included in the plan.
In either case it is assumed every member of the group is insurable provided that, every member
is working a minimum number of hours usually 30 hours a week.
Like the different cars you used in the Class A,B and C races, which had different features and
prices, the basic plans you have learned also come with different features and premium costs.
These types of products were designed to cater to different needs.

In the Championship race, you need to learn about riders or the supplemental benefits of the
basic plans. If you succeed in this, you will win the Motorama Cup!
Riders
In your quest to win the Motorama Cup, you need to upgrade your vehicle. Although you
selected a fast machine, you need to upgrade it with accessories to give you an advantage in the
race.

These accessories will improve the performance of your vehicle and you will use your winnings
from the last race to purchase them.

Much like how these accessories enhance the features of your race car, Riders enhance the
features of the Basic Plans, and in the same way that accessories would be useless unless you
have a vehicle, Riders cannot be purchased on their own unless attached to a Basic Plan.

Riders are supplemental benefits attached to the Basic Plan to expand the features of the plan at a
minimal additional cost. These can cover uncertainties that basic plans cannot cover on their
own, like accidents, disability, hospitalization and illnesses to name a few.
Accidental Death Benefit
One of the things that will improve the performance of your race car is a set of racing wheels and
tires, this provide greater stability and grip in cornering around the Motorama track.

To add a new set of racing wheels to your vehicle, you need to learn about the Accidental Death
Benefit

The Accidental Death Benefit or ADB pays an additional amount which in most cases is equal
to the basic plans face amount in case the cause of the insured's death is accidental in nature.

This is commonly referred to as double indemnity and requires that the death occurs within 90
days from the date of the accident and is caused by external, violent and accidental means.

Good Job! Now that you understand what the Accidental Death Benefit does, you can have your
pit crew replace your wheels and tires. This will surely make a difference during the race.
Waiver of Premium due to Disability
Spoilers are accessories that affect the performance of your race car by improving the
aerodynamics, which translates to faster lap times, and allows your car to travel at higher speeds.

To add spoilers to your vehicle, you need to learn about the Waiver of Premium due to Disability
or WPD

Waiver of Premium due to Disability is a rider which waives the premiums payable under the
policy in case the insured becomes totally and permanently disabled.

To be totally and permanently disabled means uninterrupted disability for not less than 6 months
which prevents the insured from engaging in any occupation, employment or business for which
he is suited by education or experience. If this is the case of the insured the life insurance
company will no longer require him to pay premiums for as long as the disability lasts. During
the period when premium payments are being waived under this benefit, the cash value of the
policy will increase and the policy will continue to earn dividiends if participating.

Good Job! Now that you understand what the Waiver of Premium due to Disability is, you can
have your pit crew install the spoilers. This will surely make a difference during the race.
Payor's Benefit
A good exhaust system for your car, improves the flow of air, allowing the engine to breath and
expel the exhaust fumes and prevent clogging of your engine

To upgrade the exhaust system of your vehicle you need to learn the Payor's Benefit

The Payor's benefit is attached to a juvenile policy and is a type of Waiver of Premium rider.
When the Policyowner or Payor dies or becomes totally and permanently disabled the premiums
of the policy will be waived until the child reaches a specified age when he can earn and pay for
the premiums of the policy on his own.

Good Job! Now that you understand the Payor's Rider you can have your pit crew upgrade your
car's exhaust system. This will surely make a difference during the race.
Guaranteed Insurability Option
Aside from being able to accelerate rapidly, race cars also need to be able to stop and slow down
efficiently, this can be done better if you have racing brakes.

To upgrade the brakes of your vehicle you need to learn about the Guaranteed Insurability
Option.

The Guaranteed Insurability Option of GIO provides an opportunity for people to buy specific
amounts of additional life insurance coverage at stated future intervals without the need to show
evidence of insurability This means that the insured will automatically pay the standard rate
since there would be minimal underwriting requirements.

Good Job! Now that you understand the Guaranteed Insurability Option your pit crew will
upgrade your car's brakes. This will surelymake a difference during the race.
Term Insurance Rider
To maximize the performance of you vehicle, engine upgrades are necessary, biger engines
provide, bigger horsepower and make you go faster around the track.

To upgrade the engine of your vehicle you need to learn about the Term Insurance Rider also
known as the Supplemental Term Rider

The Term Insurance Rider provides an additional amount of coverage for a minimal cost, the
rider has its own face amount separate from the coverage of the basic policy. Upon the death of
the insured the face amount of the basic and the face amount of the term rider will be payable.

Good Job! Now that you understand the Term Insurance Rider your pit crew will upgrade your
car's engine. This will surely make a difference during the race.
Family Income Rider
Now that your race car has been upgraded, one last modification will make it the fastest during
the race. Nitrous Oxide is an extra boost of fuel that will increase your acceleration and speed
with the push of a button

To install Nitrous Oxide tanks to your vehicle you need to understand the Family Income Rider
The Family Income Rider is a type of decreasing term insurance that may be attached as a rider
to a permanent plan. It generally provides a monthly allowance in addition to the face amount up
to the end of the decreasing term period.

Good Job! Now that you understand the Family Income Rider your pit crew will add Nitrous
Oxide tanks. Now it's time for the moment you have been waiting for, start your engines, this is
the final race to win the Motorama Cup

Click on NEXT to race!

Congratulations you won the Motorama Cup! Because of your win, you qualify to join the
Championship Race, the Motorama Cup!

Keep in mind that you won this race by learning the definition and different types of premiums,
the classifications of basic plans, and supplemental benefits or riders that can be attached to those
plans. These information will prove useful when you begin offering these plans based on the
needs of the people you will meet as an advisor.

Click REVIEW to repeat this module, or CLOSE to end this module