Premium Loan Provision and Policyholder's Election
- The Premium Loan option applies only if the policyholder explicitly requests it in writing.
- This request can be made either at the time of the insurance application or before the expiration of the policy's grace period.
- Without written election by the policyholder, the Premium Loan provision shall not automatically apply in case of premium payment default.
Automatic Option Upon Default Without Election
- If the policyholder defaults on premium payment and has not elected any option in the application or within the policy-specified time frame, then an automatic option will take effect.
- The automatic option is one of the paid-up options specified within the policy itself.
- This ensures that the policyholder still has some benefit even without an active premium payment or election after default.
Legal and Regulatory Authority
- The Circular Letter reiterates compliance with existing statutory provisions and a pertinent Supreme Court decision.
- It emphasizes the mandatory nature of these provisions for all life insurance policies issued or delivered in the Philippines.
Effective Date
- The provisions specified in this Circular Letter took effect immediately as of August 15, 1994.
Key Legal Concepts
- Premium Loan: A loan granted against the policy’s cash value upon written election by the policyholder to cover premiums in case of default.
- Automatic Option: A paid-up option that automatically takes effect when there is default and no written election, ensuring continued benefits albeit reduced.
- Grace Period: The time allowed after the due date of the premium payment during which the policyholder may still pay without policy lapse.
- Policyholder’s Written Election: The requirement of explicit written instruction by the insured to activate certain options under the policy.