EXCERPT FROM POLICY AND PROCEDURAL GUIDELINES NO.

282-15

FUNCTIONAL AREAS : Loans and Claims

DISTRIBUTION : All Senior Vice Presidents

All Vice Presidents
All Department/Branch Managers
Operations Groups
Controller Group
Information Technology Services Group
Actuarial and Risk Management Group
Financial Management Group
Corporate Services Group
Internal Audit Services Office

SUBJECT MATTER : OMNIBUS RULES ON LOANS REDEMPTION

INSURANCE BENEFIT

I. BACKGROUND/RATIONALE

During the exit conference conducted by the Internal Audit Services Office (IASO)
with the Operations Groups on 24 June 2014, one of the audit findings was the
absence of clear and detailed guidelines on the settlement of redemption
insurance resulting in varied interpretations by implementing units leading to
disservice to GSIS members and losses for the GSIS.

To address this concern, this omnibus Policy and Procedural Guidelines (PPG) on
Loans Redemption Insurance (LRI) benefit is being issued.

II. OBJECTIVES

This PPG aims to:

A. Provide a comprehensive and consolidated set of policies and procedural

guidelines on the application of the LRI benefit to various loan programs;

B. Define the responsibility of the operating units concerned in the implementation

and settlement of the LRI benefit; and

C. Ensure the uniform interpretation and implementation of the subject policies

and procedural guidelines.
III. DEFINITION OF TERMS

The following terms shall mean:

A. Up-to-date Account - A loan account where correct monthly

amortization is consistently paid and the
outstanding balance is equal to or less than the
theoretical balance.

B. Account In Arrears - A loan account with unpaid amortizations

equivalent to six (6) months or less.

C. Account In Default - A loan account with arrears equivalent to more

than the total monthly amortizations for six (6)
months.

D. Theoretical Balance - The balance of the loan if all the monthly

amortizations due were paid in accordance with
the payment plan or amortization schedule of
the loan. This is also known as the “Ideal
Balance” of the loan.

E. Outstanding Balance - The current balance of a loan account including

all unpaid arrearages, interest and penalty, if
any.

IV. POLICIES

A. Coverage

This PPG shall cover GSIS loan programs with LRI coverage, as follows:

1. Enhanced Consolidated Loan Plus (Conso-Loan Plus);

2. Emergency Loan (EL);

3. Pensioners’ Emergency Loan (PEL);

4. Pension Loan (PnL); and

5. Pensioner’s Restructured Loan – Choice of Loan Amortization Schedule for

Pensioners (PRL-CLASP).
 B. General Provisions on LRI

1. Compulsory LRI Coverage

There shall be a compulsory LRI coverage for borrowers availing of the

above loan facilities to serve as indemnity in the event of the borrower’s
death.

2. Conditions for Entitlement to LRI Benefit

The LRI shall guarantee the full settlement of the theoretical balance of the
loan in case the borrower dies within the term of the loan, provided that
such LRI is still in force at the time of the borrower’s death.

However, death arising out of the following shall not be covered:

a. Suicide or self-inflicted injuries; and

b. Use of prohibited drugs without physician’s prescription.

3. Evaluation of Compensability

The compensability of the LRI claim shall be evaluated based on the

submitted death certificate secured from the Philippine Statistics Authority
(formerly National Statistics Office) prior to claim processing.

4. Incontestability of LRI Claim

The LRI shall be incontestable. As such, if the borrower dies during the
term of the loan due to a pre-existing illness, the LRI coverage shall
continue to be in force.

5. Rate and Payment of LRI Premiums

a. Enhanced Conso-Loan Plus. The monthly rates1 of the Enhanced

Conso-Loan Plus LRI shall be as follows:

Loan Term Monthly LRI Rate

(For every Php1,000 of Loan Amount)
1 year to pay Php0.29
2 years to pay Php0.30
3 years to pay Php0.32
4 years to pay Php0.34
5 years to pay Php0.36

1
Present monthly premium rates for ConsoLoan RI as provided by the Actuary Office.
 Loan Term Monthly LRI Rate
(For every Php1,000 of Loan Amount)
6 years to pay Php0.38
7 years to pay Php0.40
8 years to pay Php0.42
9 years to pay Php0.44
10 years to pay Php0.46

To ensure that the borrower is covered with LRI from the date of loan
granting, an advance LRI premium shall be deducted from the loan
proceeds as follows:

Date of Loan Granting LRI Premium to be Deducted

On or before the 23rd of the month Equivalent to 1 month
After the 23rd of the month Equivalent to 2 months

b. EL and PEL. The LRI premium for EL and PEL shall have a rate of 1.2%
of the gross loan amount, the entire amount of which shall be deducted
from the proceeds of the loan.2

c. PnL.3 Monthly premiums for LRI coverage of the PnL shall be in

accordance with the following schedule:

Ag RI rate Ag RI rate Ag RI rate Ag RI rate

e per e per e per e per
Php1,0 Php1,0 Php1,00 Php1,00
00 00 0 0
52 Php0.5 64 Php1.5 76 Php4.7 88 Php13.
3 4 3 17
53 Php0.5 65 Php1.6 77 Php5.1 89 Php14.
8 9 6 16
54 Php0.6 66 Php1.8 78 Php5.6 90 Php15.
3 5 2 20
55 Php0.6 67 Php2.0 79 Php6.1 91 Php16.
9 2 1 32
56 Php0.7 68 Php2.2 80 Php6.6 92 Php17.
6 0 5 59
57 Php0.8 69 Php2.4 81 Php7.2 93 Php19.
2 1 6 16
58 Php0.9 70 Php2.6 82 Php7.9 94 Php21.
0 4 6 36
59 Php0.9 71 Php2.9 83 Php8.7 95 Php24.
8 0 2 79

2
Section E(5), PPG No. 261-14 or the Enhanced GSIS Emergency Loan Program.
3
Section III(I), PPG 242-13 or the Revised GSIS Pension Loan Program, As Amended.
 Ag RI rate Ag RI rate Ag RI rate Ag RI rate
e per e per e per e per
Php1,0 Php1,0 Php1,00 Php1,00
00 00 0 0
60 Php1.0 72 Php3.2 84 Php9.5 96 Php30.
6 1 4 67
61 Php1.1 73 Php3.5 85 Php10. 97 Php41.
6 5 41 31
62 Php1.2 74 Php3.9 86 Php11. 98 Php60.
8 2 30 73
63 Php1.4 75 Php4.3 87 Php12.
0 1 22

The first monthly installment of the LRI premium shall automatically be

deducted from the proceeds of the loan. Subsequent LRI premiums
shall be embedded in the monthly amortization which shall be deducted
by the GSIS from the borrower’s monthly pension.

Consequently, no LRI installment shall be collected on the last month of

the period of payment of the loan.
d. PRL-CLASP. The restructured loan shall be computed based on the
outstanding balance to be amortized and the monthly LRI rate provided
below.4

Loan Term Monthly LRI Rate

(per P1,000 of Loan Amount)
1 year to pay Php2.52
2 years to pay Php2.68
3 years to pay Php2.84

The premium for LRI shall form part of the computed monthly
amortization of the restructured loan.

The monthly amortization (with LRI premium) shall be payable through

automatic deduction from the retiree’s monthly pension.

For easy reference, the table below compares how LRI premiums are paid
for each loan type.

LOAN WINDOW PAYMENT OF LRI PREMIUMS

Conso-Loan Plus Advance deduction of LRI premium (equivalent to 1
or 2 months depending on date of loan granting)

Subsequent LRI premiums are embedded in the

4
Section III(B)(d), PPG 209-11 or the Choice of Loan Amortization Schedule for Pensioners (CLASP).
 LOAN WINDOW PAYMENT OF LRI PREMIUMS
monthly amortization

EL and PEL Advance deduction of entire LRI premiums from the

proceeds of the loan

PnL Advance deduction of first monthly LRI installment

from the proceeds of the loan

Subsequent LRI premiums are embedded in the

monthly amortization payable through automatic
deduction from pension by the GSIS

PRL-CLASP LRI premium forms part of the computed monthly

amortization of the restructured loan, which is
payable through automatic deduction from the
retiree’s monthly pension

6. Priority of LRI Premiums in the Application of Payments

In case the monthly amortization paid is less than the required monthly
amortization, the payment shall be first applied to LRI premiums.

7. Non-Issuance of LRI Policy

The GSIS shall not issue an LRI policy for every availment or renewal of
loan.

8. Loans under Moratorium

The LRI coverage shall continue to be in force during the moratorium

period. Premiums due during the moratorium period shall be included in the
monthly positive billing.

However, the borrower shall have the option to pay the LRI premium during
the moratorium period or on the 10th day of the month following the end of
the moratorium.

9. Interests on Loan Accounts Covered by LRI

a. The prevailing interest rates for the loan windows covered by this PPG
shall remain in effect.

b. Interests on the loan account of a deceased borrower qualified for LRI

shall accrue up to the date of death only.
 However, if the deceased borrower is not qualified for LRI benefits due
to the lapsing of the LRI policy coverage or the non-compensability of
the LRI claim, the interests shall be charged beyond the date of death
and shall accrue up to the date of filing of claim.

10. Termination of LRI Coverage

The LRI coverage shall be automatically terminated when the borrower pays
the loan in full or upon expiration of the term of the loan, whichever comes
first.

11. Lapsing of LRI Policy

The LRI policy coverage shall be deemed lapsed if the loan account is
already in default. As such, the corresponding LRI coverage shall cease to
be in force.

C. Application of LRI Benefits for Various Contingencies

The following policies on LRI shall apply to loan accounts and contingencies
found below:

1. Up-to-Date Loan Accounts

When the loan account is up-to-date, the outstanding balance may be equal
to or less than the theoretical balance. In case the loan account is up-to-
date, the loan shall be deemed fully paid by virtue of the LRI.

In the event that the outstanding balance is less than the theoretical
balance, the LRI coverage shall only answer for the outstanding balance.

All receivable items in the computerized system pertaining to the period

after the date of death shall be reversed and the LRI benefit equivalent to
the outstanding balance of the loan shall be set up and applied as payment
thereto.

a) Loan moratorium
 In case of demise of the borrower during the moratorium period, the
proportionate LRI5, if any, shall be deducted from any claim or benefit
due the deceased borrower.

The theoretical balance of the loan from the date of death up to the end
of the loan term shall be covered by LRI, thus deemed fully paid.

2. Loan Accounts in Arrears

When the loan is in arrears, the outstanding balance becomes greater than
the theoretical balance because of unpaid amortizations.

A borrower who dies with a loan that is in arrears shall be covered with LRI
up to the amount of the theoretical balance of the loan.

The difference between the outstanding balance and the theoretical balance
shall be considered as a deficiency and shall be deducted from any claim or
benefit due the borrower. In case the arrearages exceed the benefits due
the deceased, the excess shall be deducted from the subsequent benefits
due the heirs.

a) Death of Pensioner Tagged as Suspended

In case of the demise of a pensioner whose record is tagged

“suspended,” the theoretical balance of the PnL and PEL from the date
of death up to the end of the loan term shall be covered by LRI. The
unpaid amortization due to suspension of pension shall be deducted
from the pension accrual.

b) Loan moratorium

In case of demise of the borrower during the moratorium period, the

proportionate LRI premium, if any, shall be deducted from any claim or
benefit due the deceased borrower. The theoretical balance of the loan
from the date of death up to the end of the loan term shall be covered by
LRI, thus deemed fully paid.

Any arrearages prior to the moratorium period shall be deducted from

any claim or benefit due the borrower.

3. Loan Accounts in Default

A borrower who dies with a loan account in default shall not be entitled to
LRI benefits since the LRI coverage is already lapsed.

5 th
Sample computation of proportionate LRI: If borrower died on the 4 month of the moratorium period,
the LRI premiums to be deducted shall be equivalent to 4 monthly LRI installments.
 The outstanding balance of the loan shall be collected from any claim or
benefit due the borrower. In case the outstanding balance exceeds the
benefits, the excess shall be collected from the subsequent benefits due the
heirs.

4. Death of Pensioner-Borrower Prior to Deduction of First Monthly

Amortization

A pensioner-borrower who dies before the deduction of the first monthly

amortization of PEL, PnL or PRL-CLASP from his or her pension shall be
covered by LRI.
xxx xxx

All Orders, Circulars, Policy and Procedural Guidelines which are inconsistent herewith
are hereby superseded, modified or repealed accordingly.

This PPG shall take effect immediately.

ORIGINAL SIGNED
ROBERT G. VERGARA
President and General Manager

Date Signed: 30 April 2015