Appreciating life insurance on a different perspective
How vulnerable are your investments?
In the Philippines, discussions about death is a cultural taboo and probably one of the reasons the majority of Filipinos do not get life insurance. Familiar statements such “I won’t die anytime soon” or “It won’t happen to me” situate us between arrogance and overconfidence.
The common story
Three years ago, I met up with my friend working in an information-technology company. He is the breadwinner in the family, and a father of two. He shared with me his investments in stocks and even bragged to me how he was able to increase his portfolio from 100,000 to 130,000 in just a period of 12 months. When I was enlightening the person on the aspect of life insurance, he shared with me this sentiment:
“Jake, ayaw ko nyan. Kung namatay ako, pamilya ko lang ang makikinabang. [Jake, I don’t like that. If I die, only my family will benefit].”
After hearing that statement, I really wonder how the head of a family could even think this way.
Four months after our last conversation, I heard from our common friend that his mother was diagnosed with critical illness. Medical treatments were attempted, but after three months of fighting, she died. When I came to his mother’s wake, he mentioned to me on how his family fell into such financial burden in just a short period of time. Total medical and burial expenses amounted to P2.1 million. He told me that he was forced to sell his stocks, gadgets, and even took a loan from the bank due to these expenses.
What happened to my friend is very unfortunate, but this is common to Filipinos. Assets of surviving family members are wiped out due to illness or death.
How vulnerable are your investments?
Vulnerability does not relate to the volatility of the investments. I’m referring to the security of your investments and probable loss due to uncertainty.
Let us admit. Accumulating money excites us. But one common mistake for a lot of investors is that they are so fixated on making their money grow, they often fail to protect it from uncertainties.
A consistent P1,000 a month contribution to mutual funds (equity) for 10 years could amount to approximately P480,000 at the end of the period. Yet treatment for cancer could range between P500,000 casino online to P2 million or even higher. If neither you nor your family members are insured, let me ask the same question again: How vulnerable are your investments?
Insuring yourself is not the only solution to investment risk management. You must identify all other factors, both internal and external, that could potentially wipe out your money and investments. You must look into potential risks that could render your wealth accumulation useless.
Try asking your parents if they have sufficient or even an existing life insurance policy. How about their long-term health care? When they are “taken out from the picture,” who do you think will pay for the burial expenses, or even worse case, medical expenses?
In my situation, I am paying for the life insurance policies of my parents. And the beneficiaries are my siblings and I. But this is not to monetize or profit from their deaths. My parents are already old, and it would just be a matter of time before an uncertainty could happen. Insuring them would protect our money and long- term investments from out-of-pocket medical or death-related expenses.
Before insuring others
Before going further, there are three people involved in a life insurance: the policy owner (buyer of life insurance), the person insured, and the beneficiary/ies (receiver of benefit in case of death of the life insured). Life insurance companies always check the insurability interest of the person being insured. If the beneficiary is also the policy owner, the insurance company will be asking for the existence of any life insurance of the policy owner. If a policy owner doesn’t have any form of life insurance, suspicion may arise regarding the interest of the policy owner and the life insurance company may investigate or ask additional questions regarding the application.
If no longer insurable
Not all life insurance applications are approved. If your parents or other dependents are at an advanced age or have medical conditions unacceptable to life insurance companies, you have no choice but to “beef-up” your emergency fund. Learn from the mistakes of your parents and acquire life and medical insurance so that your children will not suffer financially in the future.
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Jake Lingan is a Registered Financial Planner of RFP Philippines. He also holds a qualification of Certified Investment Solicitor. He is currently Unit Manager and MDRT member of one of leading insurance companies in the Philippines.
Source: http://www.businessmirror.com.ph/index.php/en/business/banking-finance/30879-appreciating-life-insurance-on-a-different-perspective
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