Do you need a bodyguard for protection?
The bodyguard’s contract is very similar to a term life insurance.
THE Bodyguard is a 1992 American romantic thriller film starring Kevin Costner and the late Whitey Houston. Costner stars as a formed secret service gent who became a hired bodyguard. His services was needed to protect Houston’s character, a music star, from an unknown stalker.
The responsibility of the bodyguard is to make sure that his client be safe at all times and that in any eventuality, he may even risk his life just to make sure that no harm comes in the way of his client.
Without the bodyguard, the client will always be stressed from worries and may even have sleepless nights for fear that there is no one to protect him from someone who is out to harm him. In exchange for the risk, the bodyguard is paid a hefty sum. That is also the reason the majority of the world’s leaders, including the pope, are accompanied by several bodyguards because of their high profile, they are at risk of being targeted by assassins. Their presence gives them a peace of mind so that they can do the work they are supposed to do.
In the world of personal finance, insurance behaves very much like a bodyguard. It serves as a protection to our income when we encounter a sudden death situation. This product is not for the policy owner but for the family. A lot of people have a misconception about insurance. They always say that he will not benefit from buying one. He is very true because as the bodyguard aims to protect the person so that he can still do his duties, insurance will protect the policy owner’s income. When the policy owner dies, his income dies with him, but not his responsibilities. Insurance proceed will guarantee that the family will continue to live comfortable for a certain number of years as if he is still present earning income for the family.
During the life of the owner, the policy is kept in the safety deposit box. And when the time comes that the owner is in the box already, his policy will come out and take his place, ensuring a continuous comfortable life for the beneficiaries.
Most of the time, the bodyguard’s tenure is coterminus with the requirement of the client. If the client finds no need anymore, then the contract between them is consumed. When the threat to the security of the client is no longer existing, then the services of the bodyguard is no longer required. Whatever income paid to the bodyguard can not be refunded even if nothing happened to the client because the bodyguard traded his time and safety for income.
The bodyguard’s contract is very similar to a term life insurance. Once the need for coverage is no longer needed, then the client can choose to terminate it. A classic example is to buy term insurance to cover a housing loan. Once the loan is fully paid, then the client can choose to end the contract without anything in return. A lot of people often say that buying a term insurance is a waste of money because there is no return of payment. Analogous to the bodyguard, the term insurance has done its work of protecting the client from a financial burden once he untimely passes away. If in case the client dies within the loan period, then the insurance company is obligated to pay the balance of the housing loan. Whatever money paid to the insurance has been consumed already by its job of covering the client’s risk for the said term. Even in a variable universal life or VUL insurance policy, the premium has an insurance and investment component. The premium paid for the coverage is not refundable and what the clients deem as return of payment is actually the investment component which has grown more than the total premiums paid.
Whether term life or VUL insurance, the objective in buying one is to give protection to a family when it is needed most. If ever an insurance policy is more expensive than the other, chances are that you are buying the services of more than one bodyguard. Remember, there is no free lunch. The only question is, do you want to have a bodyguard for your protection?
Edmund Lao is a Registered Financial Planner of RFP Philippines. A sales engineer by profession, he is an advocate of financial planning.
Source: http://www.businessmirror.com.ph/do-you-need-a-bodyguard-for-protection/
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