For the past few months, I’ve been been receiving a lot of inquiries pertaining to life insurance. So I opted to rank the top 3 basic questions I encountered especially from clients with zero to little knowledge about it. And here I will try to answer these questions as simple and as straight as possible.
1. Paano ba 'yan?
Unlike most financial advisers capitalizing on selling Insurance as investment (though there’s truth in it), I always tell my clients that the main purpose of Insurance is protection. Kung may mga taong dependent on you financially, let’s say you’re a parent, a breadwinner, nagpapaaral or tumutulong ka sa gastusin sa bahay, Insurance will serve as a protection for your loved ones in unfortunate events such as death. Ibig sabihin, whether tapos mo na bayaran ang insurance mo or hinde, if that happens, a guaranteed amount of money will be given to your beneficiaries that can be your kids, partner, parents or other members of your family. And this guaranteed money ang sinasabi kong “protection”. Protection pagdating sa maraming bagay tulad ng:
- Education of your child (Kung ikaw ay may pinaaaral, hindi kailangang mangutang, tumigil sa pag-aaral, o ilipat sa mas mababang paaralan)
- Bank Loans or Personal Debts (Kung may naiwan kang mga personal na utang or loans sa bangko, hindi ito poproblemahin ng mga maiiwan mo dahil pwede nilang ipambayad and perang matatangap nila)
- Estate Tax (Kung ikaw ay may naipundar na ibang investments like real estate or stocks, kahit ipamana mo ito sa mga anak mo, kailangan pa rin nilang magbayad ng taxes para makuha ito. Ipapaproblema mo pa ba sa kanila ang pambayad ng tax?)
- Hospital or Funeral Expenses (Hindi na magiging problema ng pamilya mo ang mga naiwang hospital bills at funeral expenses)
- Quality of life (Hindi basta basta maghihirap ang mga maiiwan mo)
- Instant Savings (Maaari mo rin itong ituring na instant savings or pamana para mga anak or pamilya mo)
If there’s one thing certain in this life, it’s death. And the problem is we don’t know when it will hit us. That’s why, getting an insurance policy while you’re young and healthy is a very smart decision. A lot of young and single people say, “wala pa naman akong pamilya so I don’t need it”. My answer there will always be “It’s your choice“.
In my case, I got my insurance policies when I was still single and now that I’m starting my own family, all I need to do is to add my husband and kids as beneficiaries as I’m almost done paying for it (10 years). So instead of using our funds to buy the insurance now (which is more expensive as we get older), it feels good that I can already allot our money for my family’s basic needs such as food, clothing, house, bills and recreation. Isa pa, kapag may pamilya ka na, mas mahirap nang magbudget at kadalasan, malungkot man isipin, insurance ang sina-sacrifice with the thought na, “saka na lang, pag medyo nakaluwag na”. But we all know na hindi naman natatapos ang gastos. And one day you’ll be surprised, matanda ka na pala. Ang mahal na pala, or worse, hindi ka na ma-approve dahil nnagkasakit ka na.
Getting insurance while you’re still single or living with your parents is a very wise decision. Now if you’re already married and you have dependents relying on your income, the more that you need to secure one. If you let this time pass, in the future, most likely you will say, “I wish I started today”.
2. Paano kikita ang pera ko?
There are different types of Insurance products addressing different needs like life, health, education, accidents etc. But if you’re the type of person who wants your insurance to have an investment component, meaning a portion ng ibinabayad mo ay i-iinvest para kumita, then there are Insurance products that can give you this.
Paano ito nangyayari? Simple lang. For every payment that you’ll make, a certain percentage will go to insurance and administrative charges while the rest will be allocated to investment. The amount that goes to investment will be managed by fund managers at sila na ang bahalang mag invest para sa’yo either through bonds, equities and the likes. Ang posibleng kitain ng pera mo dito ang tinatawag nilang Fund Value or Projected Benefit. Kapag kumita ang pera mo, pwede mo itong i-withdraw though we strongly suggest that you leave it for a minimum of 10 years for a higher possibility of profit.
Remember that just like any investment, the returns are not guaranteed so it’s important that you look into the historical performance of the company you intend to get insurance from. But always be reminded that unlike any other investments, whatever happens to the market, the insurance component or the guaranteed amount your beneficiaries will receive will remain intact no matter what.
Right now, I’m on my seventh year on my first insurance and it feels good that I can back up whatever I say with my own experience.
There’s a lot of products in the market nowadays. Before you say yes to any financial advisor, make sure that the product being offered to you is aligned with your goals. I got my first insurance without really understanding how it works but I am lucky that when I assessed it, it’s also a very good product.
3. Magkano ang minimum?
Before asking magkano ang minimum, the right question actually is: magkano nga ba ang kailangan mo? But to address the question “Magkano ang minimum?”, my answer is: It’s up to you. Why? Because the coverage and benefits that you’ll receive will be dependent on how much you’re willing to invest. Bear in mind that age and current health status also play a role in terms of how much you need to pay. But in case you want to have an idea for a 1 Million coverage, you may refer to the image below.
Let’s say you’re 30 years old, female and non-smoker, a monthly payment of Php 1,985 for 10 years or a total of Php 238,250, will already give you the following:
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1 Million Guaranteed Insurance Coverage that your kids or family will receive in case of death. In case death happens on the 3rd year at hindi mo pa tapos bayaran ang 10 years, your family will still receive 1 Million pesos kahit ang total na naibayad mo pa lang sa loob ng tatlong taon ay Php 71,460.
- 1.2 Million Projected Benefit at 10% Return at age 55
- 1.9 Million Projected Benefit at 10% Return at age 60
- 3 Million Projected Benefit at 10% Return at age 65
Saan galing ang Projected Benefit? Ito ang investment side na nabanggit ko sa Question #2 na iniinvest sa bonds or stocks ng mga fund manager. Sabi ko nga, maaari kang mag withdraw dito in cases of emergency or gusto mo lang i enjoy ang investment mo.
In case hindi mo ito ginalaw at pinalago mo hanggang age 65 (Php 3 Million already) but you suddenly die, you don’t need to worry as it will not go to waste! Your beneficiaries will receive the 3 Million pesos giving them a total of 4 Million (1M Guaranteed Amount + 3M Projected Benefit). All these for a total investment of just Php 238,250 or just Php 1,985 per month for 10 years.
The illustration above highlights na the younger you are, the more affordable life insurance is. The younger you are the more time for your fund to grow and withstand the volatility of the market or yung tinatawag na pagbaba at pagtaas ng market. Mas mahabang panahon, mas malaking chance na kumita nang mas mataas ang investment mo.
My thoughts and advise
While there’s a lot of investment options out there, I am a strong believer and advocate that life insurance should come first. Because at the end of the day, most of us are working our ass off for our dreams and the dreams of our loved ones. Before we take major risks on investments, let’s secure first ourselves and the people that matter. Life Insurance is a long term financial strategy. And as what Randell Tiongson said, “You should not sacrifice long term gains by enjoying short term benefits”. In case may mga investments na mukhang too good to be true dahil mataas ang interest na pwede mong kitain at a short time, then baka nga it’s too good to be true! Educate yourself and make sure alam mo kung anong pinapasok mo.
This article answered just the top three questions I received from the past few months. I myself have spoken to several advisers when I was in my 20s and I ended up pretending I understood but really, I don’t! So now that I’m in this business, I try to explain it as simple as possible as if I’m talking to myself seven years ago! So just in case you want to jumpstart your financial planning, just send me a message and I will gladly share with you what I know and what I personally experienced, with the hope that I can make an impact on your fabulous life! As I always say, time is very critical in any type of investment. And if you’re not gonna start now, then when?
