Contractually, insurance companies bear responsibility to service policy owners.
Advisers should be familiar with policy servicing matters for added value to clients.
Importance of understanding insurer's servicing practices, particularly regarding premium payments and policy changes.
PREMIUM PAYMENTS
Rights of the Policy Owners
Policy owners have the right to choose:
Frequency of premium payment.
Methods of premium payment.
Frequency of Premium Payment
Specified by the policy owner at inception; options include:
Monthly
Quarterly
Half-yearly
Annually
Some insurers provide recurrent single premium options.
Adviser’s role: Help clients select appropriate frequencies, explaining advantages/disadvantages and explaining consequences of non-payment, especially policy lapsing in early years.
Change in Frequency of Premium Payment
Changes may occur due to financial circumstances:
Less frequent to more frequent payments (e.g. annually to monthly).
More frequent to less frequent payments (e.g. monthly to annually).
Important Note:
Less frequent to more frequent change takes effect after the last annual premium is fully used (no refund of annual premium).
Insurers may set minimum premium amounts (e.g. minimum S$25 for monthly premiums).
No need to wait for policy anniversary for changes when moving from quarterly/half-yearly to monthly.
Methods of Premium Payment
Various methods to make premium payments:
Cash or Cheque: Direct payment to insurer.
Banker’s Order: Authority given to deduct from bank account.
GIRO Deduction: Automatic monthly deductions from bank account.
Payroll Schemes: Deductions from salary for employer-managed payments.
CPF/SRS Accounts: Use of CPF/SRS funds for paying premiums.
PREMIUM RECEIPT
Types of Receipts
Conditional Premium Deposit Receipt:
Issued by adviser upon first payment.
Provides temporary cover for accidental death.
Official Receipt:
Issued by insurer to acknowledge premium payment.
PREMIUM NOTICE
Insurers typically send premium notices to remind policy owners, especially those paying by cash or cheque.
ADVISER’S ROLE IN PREMIUM PAYMENTS
Advisers should be proactive in reminding clients of outstanding premiums.
Provide guidance on policy changes due to financial difficulties (e.g. changing payment modes).
POLICY ALTERATIONS
Importance of Alterations
Policies should adapt to changes in circumstances (e.g. change of address, name).
Common Alterations
Changes allowed include:
Address
Name
Frequency of premium payment
Sum assured (increase/reduction)
Change of policy type
Removal/addition of riders/benefits
Changes to beneficiaries.
DUPLICATE POLICY
Requirements for Issuance
Written request, statutory declaration, indemnity, police report (if stolen), payment for duplication.
ASSIGNMENT OF POLICY
Types of Assignment
Absolute Assignment:
Assignor transfers all rights to assignee.
Conditional Assignment:
Rights revert to assignor under certain circumstances.
Assignment By Gift/Valuable Consideration:
Assignment can be a gift or require payment.
POLICY LOANS
Policy loans can be obtained against cash value of life insurance.
Payment of interest on loans at insurer-determined rates.
WITHDRAWING CASH BONUS
Procedure for withdrawing bonuses from participating policies; implications of withdrawals on future policy value.
LAPSING POLICIES
Reasons for Lapsation
Non-payment of premiums and financial difficulties.
Implications
Loss of coverage for policy owner; potential losses for insurer.
REINSTATEMENT OF LAPSED POLICIES
Typically allowed within two to three years, requiring payment of all arrears and possibly evidence of good health.
SURRENDERING OF POLICY
Policies with cash values can be surrendered after in-force for a minimum of three years.
Advisers should provide alternatives to clients considering surrender for financial hardship.
EFFECTS OF BANKRUPTCY ON LIFE INSURANCE
Statutory Position
Bankruptcy laws establish when a life insurance policy is protected from creditors based on nominations and trusts.