Do I need a Life Insurance?
Hello my Traders Lounge Family! What motivated me to write this article is my fellow millennial who are trying their best to be financially responsible. Here, I will share my thought process why I decided to get a life insurance and some fun facts you need to know about life insurance.
It was 2015 when my friend approached me if I’m interested to get a life insurance. I did not really know how it will benefit me then. What caught my attention is I can grow my money in just a span of few years. My financial adviser convinced me by when he told me if I get a policy of 36k per annum for 10 years that is 360k for 10 years, in exchanged I’d get the following:
- The sum-assured of 1 million in case something happens to me. I’m covered until 2090.
- Withdraw Profit from the investment fund (portion of my premium goes to investment fund)
What was I thinking then? I liked the trade-off: 36k per annum for 10 years vs. the two things they’d give me (Profit + 1M Sum-assured. I was young then and still young now Haha. So I thought, it’s a good deal.
For those who have no idea about life insurance. Kindly read the briefer below.
What is a Life Insurance?
Life insurance provides financial support to the bereaved family (yung mga naiwanan mo) in case of untimely death of the insured (you). There are two types of life insurance. First, Term Life Insurance, this will have you covered for a certain period between 10 years and 30 years. This type of Life Insurance is cheaper than the second one- Permanent life insurance. This policy gives you a lifetime protection. I will not discuss the details; your agent can explain that to you once you decide to get one.
What are the pros and cons?
Protects your loved ones. It will pay you or your family the promised money (Sum assured) e.g 1Million
Additional expense for you
It aids financial difficulties in case of uncertainties like death, accident, disabilities and critical illness.
Processing may be tedious.(but not all the time)
Can make profit out of it.
Uncertain returns(market value of investments vary)
I did not go through the details of different life insurance policy. You may Google search them as there are plenty online articles discussing Life Insurance. What I want to share to you are FUN FACTS about having a life insurance and some of my first-hand experiences about how I benefited from my life insurance policy.
THE 6 FUN FACTS
It’s not for you but for your loved ones. The sum-assured of the insured will be given to the beneficiary in case of untimely death. This is one way of protecting your family from financial burdens in case of death. As I have said the previous article Managing Personal Finance, death is inevitable, and having a life insurance is like helping your family cope up for your loss. Being a provider for the family, I find this as a selfless act of giving your loved ones a safety net.
Did you know that it can be used as collateral for loan? The borrower must be the policy owner. The lender and borrower should agree by making the lender the primary beneficiary of the policy owner. It all depends on the agreement. This is just to give an idea. YES! it is possible. Although, I have not tried it yet.
The younger you are, the cheaper the cost of the life insurance policy. Insurance business is dealing with probabilities. The younger the policy owner, the lesser likelihood of dying. You know what I mean. Same is true, if you got your policy on a later year, it will cost more on your premium with lower sum-assured. Getting a life insurance at 21 is cheaper than getting a life insurance at 30.
Not all can be insured. Health is a vital component. If you have history of critical illness or sickness, the insurer may deny your application.
This is the exciting part, where you can benefit from your insurance policy while you’re still ALIVE. A portion of your contribution/premium goes to investment fund. What is an investment fund? It is a fund that is primarily invested in stocks (blue chip companies). Although, there are also options for government bonds.
What I am pointing here is your money will grow overtime. You may not feel like seeing it grow in the first two years but give it time. The only but here is the market value of your equity units depends on the market as well. For now, PSEI is down, blue chip stocks comprising the index are also down, so is the market value of my investment fund. From 2.14 per unit, it went down to 1.70ish.
Lastly, proceeds from your investment fund can be pulled out. In my experience, I had no plans of getting my profit since I just want to keep it growing. I have zero expectations of its growth rate as well. But I had a cash emergency so I decided to pull out some. I was able to withdraw twice-2018 and 2020. I got my insurance 2015, my investment fund value grew by 50%. And YES I withdrew a total of 50% profit from my total contribution. The process of withdrawal is also online. So it’s hassle free. Proceeds were credited directly to my bank account. I also used some of the proceeds to add fund to my trading portfolio.
A PIECE OF ADVICE
The purpose of this blog is to share facts backed up by personal experience. I will not be selling insurance nor convince you to have one. This is for the benefit of those who are weighing whether they’d get one or not. Before making this blog, I also consulted with a TL member who happens to be a Financial Adviser/ Insurance Agent to check some facts. Here are some practical advices she gave that you might want to consider:
- Always get a policy that you are comfortable with, you can always get a new one in case there is a shortfall.
- Your financial adviser is as important as a factor to your policy. Try and look for someone who truly cares and will be there for you
- In choosing your policy, consider your budget. How much can you spare? And work with that.
In my case, my financial adviser is my friend. I get to ask him from time to time and he’s just a one chat or call away. I picked a 10 year plan (TERM) over PERMAMENT since I know myself. I’m allergic to a long term commitment. I’m not sure if I can still pay my premium until 60, so I opt for 10-year plan.
I hope this article helps my fellow millennial in deciding whether to have one or not. By the way, I included here the top 10 Life Insurance Company in the Philippines in case you might be interested to get one.
Anonymous Blog Contributor
Top 10 Best Life Insurance in the Philippines
|Philippine American Life & Gen. Ins. Co.
|Sun Life of Canada (Philippines), Inc
|Philippine Axa Life Insurance Corporation
|Manufacturers Life Insurance Co.(Phils.), Inc.
|BDO Life Assurance Company, Inc.
|Insular Life Assurance Company, Limited
|BPI-Philam Life Assurance Corporation
|PRU Life Insurance Corporation of U.K
|FWD Life Insurance Corporation
|United Coconut Planters Life Assurance Corp
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