More Filipinos seen buying insurance policies

Here’s an article from the Philippine Daily Inquirer , dated 20 February 2012.

Columnist Ronnel W. Domingo, talking about the rising life insurance policies being issued throughout the country. Finally, Filipinos from all social class are realizing the benefits of having a good insurance policy.

Read the article: http://business.inquirer.net/45377/more-filipinos-seen-buying-insurance-policies

VARIABLE LIFE INSURANCE

Variable Insurance is one of the best products that could help you achieve financial wellness. It combines the benefit of having Life Insurance to financially protect your family while having an investment portfolio to raise and preserve your capital at the same time.

Going straight to the point, the payment scheme is fairly easy. You could either choose a Single-Pay variable product if investment is your top priority or Regular-Pay if financial protection is of much greater importance than Investment.

To get yourself started, all you need to do is pay the premium charge (it’s all about the money!). Once you have paid, your money would now be converted to units of investment. With your available units of investment at hand, you have the power, the option, the freedom to choose which Fund to invest in, there are usually three available options.

1. EQUITIES FUND: Your units will be invested in the Equities Market or Stock Market (as it is more famously known). Insurance companies have fund managers working for them to do all the investing stuff, these fund managers are the one calling the shots in regards to what stocks to invest in. Typically, they invest in blue chip stocks. Blue Chips are those big and financially strong companies that have the lowest probability of going down-they’re simply the best of the best.

This fund is best for people who have a long-term financial objective. Say, they are fine parking their units of investments here for 5, 7, 10 years. As we all now, the stock market is a very unstable market, so a fair warning to you sir’s and madam’s, this fund is a high risk investment, you should have a high risk appetite and a strong heart muscle so you wouldn’t suffer a heart attack once your fund experiences down falls. To put a smile on your face, always remember, with high risks, comes possible high returns. Looking to raise your capital over the long-term? Then this is the one!

1. FIXED INCOME FUND: In this fund, the insurance companies invest in Bonds. Bonds are debts instruments (utang) by the Government and/or certain Corporations. It’s called fixed-income because this fund would receive regular pay-outs (bayad) for a certain period of time from the Government and Corporations that issued the bonds. Obviously, this is for those people that are conservative. If preserving capital while earning a decent amount of income is your investment objective, then, surely enough, this fund would satisfy you.
2. MANAGED FUND: A combination of the first two funds; Equities and Fixed-Income. With this fund, you could raise your capital while creating a fixed income stream at the same time. Equities could rake in the profit while Fixed-Income will be your safety net, it could leverage your risk when the equities are not doing good by providing consistent income returns.

Exciting! right? So, once you have chosen where to put your units, the insurance company that you’re doing business with will charge you an Initial-Set Up Fee (to process your fund) and Mortality Fee (to cover your Life Insurance protection).

There is this thing called SWITCH option, this enables you to pull-out your units from one fund and invest it in another fund. Say, you want to move from Equities to Fixed-Income, all you have to do is avail yourself of the SWITCH option. Generally, insurance companies offer a number of free switches, but once you exceed the number of switches; your insurance company will be forced to charge you a fee.

Usually, Insurance companies give a 15-day cooling off period, so you could contemplate on whether you’re willing to go with your fund all-the-way or back out instead.

Once you’re satisfied with the performance of your fund, you could re-invest additional units of investment by using the TOP-UP option. Every single company in the Philippines have this option. There is a corresponding processing fee for this option but it is only minimal. That fee will somewhat be used to pay for all the paper work and labour the company will have to do for you (Nothing’s free nowadays).

A NAVPU or Net Asset Value per Unit will be issued to you every now and then. This NAVPU will tell you the worth your unit of investment. If you see that the value of your unit is increasing, then rejoice! and pray it continuously increase. The higher the value of your NAVPU, the bigger profit you will have. Well, of course, if your NAVPU goes down, don’t panic and cash out your units, stay calm and ride the storm.  Invest additional units and put it in your fund, you will see that this is only a temporary event; it would eventually go up in the future.

A rule of thumb, the more units of investment you have, the greater the chance of earning huge amounts of profit.

Always remember, this is first and foremost an insurance product-with-an investment component. Your Death Benefit has two variations; Level Death Benefit and Increasing Death Benefit. Level Death Benefit is for those who are Investment Savvy, the amount benefit would match your Sum Assured (Insurance Coverage) and Fund Value (The net worth of your fund), upon your untimely death, your beneficiaries will receive whichever is higher between those two. In Increasing Death Benefit, your beneficiaries will receive the total of your Sum Assured & Fund Value, these are for people who are Life Insurance Savvy.

P.S. The risks involved in the variable product are borne by you, being the insured-investor. The insurance company would not be held liable in case of a loss from your investment, YOU! would always have the authority, final say on whether to push-through, switch or cash-out your funds.

Before you avail of this product, always remember, your financial adviser/insurance agent is tasked by the Insurance Commission to discuss with you all the necessary fee’s, options and details of the variable product that you have chosen. Be meticulous, ask questions and research on the background of your potential insurance company.

BUY LOW-SELL HIGH! GOOD LUCK! 

LIFE INSURANCE EDUCATIONAL PLAN

Throughout the years, life insurance have evolved and developed into a more formidable financial instrument. Nowadays, life insurance companies aren’t just confined to the four walls of insurance; it has extended its halls into new territory. Educational plan is the newest service to be offered by life insurance companies all over the world.

Compared to other institutions that offer the same service, life insurance companies offer more superior products. Superior in terms of quality, quantity and consistency; Quality service, faster transactions, Quantity of dole-outs, you get more money & Consistency, in the Philippines, no life insurance company have ever had any problem with their obligations, a solid track record of payments back the industry.

There are still a lot of people that mistake life insurance companies for pre-need firms. The dreaded College Assurance Plan (CAP) is a pre-need firm.

Majority of Life Insurance companies in the Philippines are backed by strong banks-almost all have a bank partner. Philam Life with BPI (both company owned by the Lopez’s), AXA Life with Metrobank, Generali Pilipinas with BDO, PNB Life with PNB & Allied Bank (all under the Lucio Tan group of companies) just to name a few. The probability of your educational plan folding down or not being paid is very slim, but just to be sure, chose between the current top 10 life insurance companies.

Shop around, ask for quotations, check and compare who has the better offer in terms of premium and benefits.

The mechanism of these educational plans are fairly simple, the schedule of endowments may vary from one company to the next but over-all, they follow the same universal rule.

You pay premiums for a specific amount of time. The mode of payment is at your discretion, be it Annually, Semi-annually, Quarterly or Monthly. After the full payment, your child will receive scheduled endowments (this will depend on the contract) and at the same time be insured for life’s uncertainties.

Yes, your child would be insured. It’s a three-in-one product. You have life insurance, educational plan and peace of mind-knowing that no matter what happen in the future, your child would have the money needed to start his education.

WHAT’S THE BEST AGE TO BE INSURED?

Basically, the younger, the better; the most ideal age is between 7days old to 30 years old. This is because the premium value is much lower. The probability of dying is much lower for young people compared to a 40, 50, or 60 year old person. Don’t get me wrong, I am not telling that the 40 year old person should not avail of insurance; it is just that the premium would be a bit higher.

In most cases, women also have a much cheaper premium compared to men because of the fact that men have a higher mortality rate than women.

In the Life Insurance world, your life expectancy is in direct proportion to your amount of premium. If you are young but obese, your premium would be doubled compared to a fit person who’s the same age as you, that is to make up for your short life expectancy. Insurance would always want people to be healthy and fit in order to live longer.

These two factors, age and gender, are crucial in considering a life insurance in terms of the cost of coverage-how much money will you be willing to spend. Times are hard and every peso count.

Most of us always want the best value for the cheapest price, so while still young, it is wise to invest in life insurance coverage.

IS LIFE INSURANCE JUST A FINANCIAL EXPENSE?

At a recent coffee meeting, I had a great conversation with my future CPA friend regarding her financial view on life insurance. A good argument she made was that, Life Insurance is just another financial expense. I believe a good number of the Filipino people share the same point of view. In her case, she made clear that she’d rather stay liquid and solvent than put her money on a life insurance policy. She also mentioned that, if she had to choose where to put her money, she’d rather invest it in a good business enterprise, that way she could grow her money and if in the moment she meets an accident or meets her creator, whichever comes first, all the expenses incurred in the event could be settled by the proceeds from the business. Before ending her argument, she also pointed out that, in a scenario where a person who has paid his premium for 3 years with a 5-year paying period, then experiences bankruptcy and because of that, cannot continue the payment, all the premium that have been paid would be reduced to waste-the payments would lapse, the policy would be surrendered and the guaranteed cash value would only amount to a fraction of the total premiums paid.

These are exactly the same views that a couple of my clients have enthusiastically shared with me. The doctor would rather purchase a piece of land than avail of life insurance, the engineer would choose lumber and plywood over insurance and an entrepreneur would reinvest her capital in the business instead of insuring herself. The common denominator I found under these people is that they all have faithfully and lovingly insured their cars and their properties. It’s really amusing.

Life Insurance is an expense-Yes. But it is a good expense. Everything is an expense nowadays; it’s just a question of good or bad.

Life Insurance was created for a reason, not to be mellow-dramatic, but it’s here to help protect the beneficiaries of the insured-financially, if in case he or she unexpectedly die. That Life Insurance benefit is the money that you would have earned if you didn’t die. If you are covered for 6 Million, that 6 Million is the money that you would’ve earned if you we’re still alive. That’s why you would always read or hear-“the ideal insurance coverage is 6 to 7 times your annual salary.” In the 6 or 7 years, you would have earned 6 Million of total salary, the beauty of insurance is that, even now that you are dead, your family could go on living as if you are still providing for them.

To stay liquid and solvent is great, it is ideal, but we are talking here of future uncertainties-the game of probability. Being liquid and solvent doesn’t guarantee that you are financially secured. Even the wealthiest people aren’t immune to financial meltdowns. The wealthier you are the harder you go down if you don’t have a financial cushion.

To the argument of what if a person goes bankrupt and lapses his payments? In all reality, the policy and the premiums paid won’t go to waste. All insurance companies have a variety of options ready for the client if such an event occurs. The client could opt to have a limited-term extension or a paid-up insurance option, to name a few. To surrender the policy is the last resort.

To compare a life insurance investment to a business investment is like comparing apples to oranges. One is to protect income the other is to grow income.

If you have a car, why do you insure it? If you own a building, why do you have fire insurance?

Well, do you have a life?

It may be an expense, but it’s a good one.

SHOULD SINGLE PEOPLE CONSIDER LIFE INSURANCE?

YES! That is if you have any plans to marry and have children in the future. Even if you aren’t providing for anybody at the moment, you should consider being insured for your future family.

Let’s say you’re 25 years old right now, single, is earning a monthly salary of Php 15,000.00 and have a wonderful plan to make a family by age 30. Now is the right time, you should not wait for 5 more years to consider having an insurance coverage. 1^st things 1^st, at age 25, your premium is much cheaper compared to age 30. 2^nd, keep in mind that a lot of things could happen in the 5 year span, life is full of uncertainties. If in the 5 year time line you meet an accident or contract a disease, there is high probability that you could be rendered uninsurable by most life insurance companies.

A good life insurance coverage could pay for your medical expenses and by the time you have your own family, (even though you can’t avail of additional life insurance anymore) you’ll have peace of mind knowing that you still have that life insurance coverage you got 5 years ago to financially protect your lovely wife and children at the present time.

An insurance coverage is also a good indicator that you are a responsible person. You’re thinking ahead, thinking of the future and is providing a solid financial security for your family-to-be.

WHAT DOES “TOTAL LIVING BENEFIT” MEAN?

Total Living Benefit and Guaranteed Cash Value means the same thing, it is the value or the worth of your life insurance policy if you ever decided (for whatever reason) to end your insurance coverage with the life insurance company.

The Total Living Benefit and Guaranteed Cash Value are worth only a fraction of what you have paid for your premiums. Let’s say your Annualized Premium is Php 37,333.75, its total living benefit would only be Php 18,402.00. The computation may differ from company to company but the idea is universal.

Total Living Benefit is a great measure to counter money launderers.

In a scenario where there is no Total Living Benefit, a client that earns money thru illegal gambling like Jueteng could use the proceeds he got from the activity to pay for life insurance coverage. He could hide the dirty money in a life insurance policy for a year or two and then withdraw the money by ending his insurance coverage, by doing so, he had rendered his money clean, no trace of dirt or stench. Total Living Benefit will discourage would-be money launderers from using life insurance as their laundering vehicle. If they use life insurance to launder money, they’d only get ¼ of their total money.

The Total Living Benefit and Guaranteed Cash Value are both good reminders that investing in life insurance is no joke and not to be taken lightly. Once you avail of a life insurance coverage, you should take the premium payment seriously or if not, you’ll be wasting your precious money and time.

THE POWER OF LIFE INSURANCE RIDERS

First and foremost, it is called a rider because of the obvious reason that it is only attached to the main policy-it can never stand alone.

A lot of people don’t realize the power of these Life Insurance Riders; some just take it for granted and many others ignore it completely.

Having a rider maximizes the benefit of your insurance policy and it would cost you almost next to nothing.

Here are the top 3 main RIDERS that I believe you should consider having in your policy.

1.       ACCIDENTAL DEATH & DISMEMBERMENT RIDER.

All life insurance companies have this, although some might have a different name for it. The main feature of this rider is that it will provide YOU & your beneficiaries a lump sum of money if in the policy lifetime you meet an accident and (1) suffer a loss of limb or any body part in the process. Each finger, each limb, each body part has a corresponding amount of indemnity for it. (Please refer to your chosen insurance company’s DISMEMBERMENT TABLE for the corresponding amount of indemnity.)

If in the accident you (2) pass away, your beneficiaries will receive a lump sum beside the actual face amount of your policy. This way, your beneficiaries will have additional death benefit which could be used to fund for your funeral & medical bills.

2.       CRITICAL ILLNESS RIDER.

Again, all life insurance companies have this. This rider is crucial especially in the Philippine environment. 80% of Filipinos have high probability of suffering from Heart Attack, Stroke and/or Cancer during their lifetime. With the rising prices of medicines and hospitalization fees, suffering from any critical illness would be devastating not only to you but also to your family. Financially, the critical illness would eat your family alive.

Having this rider on stand-by would protect you & your loved ones from incurring debt due to any such critical illness. Once you suffer from a critical illness such as Heart Attack or get diagnosed with Cancer, the insurance company would automatically give you or your loved ones the designated benefit amount. This benefit amount might mean in some situation, life or death to you, for it could fund your much needed medical expenses to stay alive.

Think of your uncle or grandpa who suffered from a heart attack, if only they had a critical illness rider, their families wouldn’t need to borrow money to pay for their medicines, he might even have an extra amount of money from the benefit to fund for his rehabilitation program-LIFE SAVER!

3.       MEDICAL/HOSPITALIZATION INCOME.

Unfortunately, not all life insurance companies have this kind of benefit. Medical or Hospitalization income is self-explanatory. Once you get confined in a hospital, the company would give you sums of money for a limited number of days (this is solely at the discretion of the company.) Some life insurance companies also provide medical reimbursements. This rider could help supplement your medical fund, such as your PhilHealth.

So, there you have it, 3 RIDERS that you should consider. There are tons of other useful riders out there, each with its own unique ability to help solve a particular problem. The ones I provided are the riders which I believe needs to be mandatory when having a Life Insurance Policy here in the Philippines.

HOW TO CHOOSE THE RIGHT LIFE INSURANCE COMPANY FOR YOU? JUST LIKE PICKING A CAR BRAND.

(Note: Car Brand & Car Company is used interchangeably & means the same in this article.)

Yes. It’s as simple and as complicated as choosing a car brand.

As of 2010, there are at least 34 Life Insurance Companies here in the Philippines. You could Google what’s the top 10 Life Insurance Companies in the Philippines to see who’s leading the pack right now.  Though, most of the companies in the top 10 list would claim that they are leading the industry. Car companies are no exception, there’s a top 10 list too, and most would claim they are number 1.

Now, when choosing what Life Insurance Company to do business with, (Since I love cars) I’d like you to think of it as picking the right kind of Car Company to do business with.

We usually buy a car because it’s a necessity. It’s a need not a want, to take us from point A to point B (in the most comfortable manner).  Same thing as life insurance, it’s used to take our financial life from point A to point B (in the most comfortable manner).

Rule #1: The car brand should have a model that matches your lifestyle. If you’re a family man with a beautiful wife & 5 lovely kids, then, common sense would dictate that you pick a brand with a model that has the most spacious room. Same thing with a Life Insurance Company, you should pick who has the MOST SUITABLE PRODUCT that could benefit your wife and kids.

Here’s a good example.

Isuzu Altera or Ford Everest? Both are awesomely spacious, both have luxurious interiors, both have diesel engines & both are reliable brands. Most review would say that, Everest has the power while Altera has the mileage.

It would all boil down to your objective preference of POWER or MILEAGE.

If you love taking you family out-of-town every weekend then obviously you’ll go for the brand with the model that has the better MILEAGE. If you like taking them off road, then POWER is the answer.

See? Life Insurance Companies too are like this. 2 Companies might have a product that has mainly the same features built-in; let’s say, the 2 companies both have a product that is PARTICIPATING WHOLE LIFE WITH ANTICIPATED ENDOWMENTS. Both will cover you until age 100, the difference might come from the frequency on when the endowments are given. One might give it annually but with lower value, while the other might give it every 3 years with a higher value.

Ultimately, it is your objective choice. The company with POWER or the other with MILEAGE? The company with annual endowment but low value or the other with triennial but high value?

WHEN CHOOSING A LIFE INSURANCE COMPANY, PLEASE ASK YOUR SELF.

“WHAT KIND OF LIFE INSURANCE PLAN DO I NEED?” TERM, WHOLE LIFE

BROWSE THE WEBSITES OF YOUR 2 TOP PICK COMPANIES, AND THEN COMPARE THE PRODUCTS THAT YOU HAVE CHOSEN FROM BOTH COMPANIES. SEE WHO HAS THE BEST SUITED PRODUCT FOR YOUR FINANCIAL OBJECTIVE.

AFTER YOU HAVE CHOSEN. SMILE. BECAUSE YOU HAVE FOUND THE ANSWER.

Talk to the financial advisers from the companies. They’ll give you a more detailed picture of the product that you have chosen.

Life Insurance vs. Small Business

Here’s a great article I recently received from Mr. BHONG MATIENZO
(A great guy with an awesome life)

So, where would you put your hard earned money? Life Insurance or Business?
To help answer that question.. read on.

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Posted on November 9, 2011 by Randell Tiongson

Question: Should I invest in a life insurance or use the money to expand my small business?—Mary Anne Maloles Tesoro via Facebook

Answer: I am a firm believer of life insurance. I make sure my life insurance policies are always in force as they give me and my wife peace of mind. With the way I travel and the many hazards I face like sleeping audiences and bored readers, life insurance is an important risk protection tool for me. Life insurance is first and foremost a tool for risk management by way of a risk transfer mechanism. Simply put, certain life risk such as untimely death or serious physical breakdown can be assumed by way of an adequate life insurance policy. Since I am married, happily at that, and have four lovely children, having the protection of a life insurance policy is a priority.

Life insurance as an investment is another story. The primary purpose of life insurance is to provide financial protection against life’s risk but investment can be a secondary benefit. It is difficult to compare life insurance with other forms of investments because of the nature of insurance itself. Life insurance needs to deal with actuarial tables and a lot of probabilities because of its primary tables. All those probabilities need to be accounted for and adequate provisions must be made. When you invest in a life insurance policy, not all the money goes to investment as some is allocated for insurance premiums. There are many types of life insurance but since you are referring to it as an investment, I assume you are talking about the variable universal life or unit linked insurance—an insurance policy with an attached investment similar to Mutual Funds or Unit Investment Trust Funds. Variable type insurance will not perform at par with a mutual fund or a UITF because not all the money is invested in the funds—premiums for insurance protection are allocated from the money invested and these are recurring charges. The bigger the coverage, the smaller the amount goes to pure investments. Its advantage, however, is when the insured (or investor) dies, the named beneficiaries will get both the insurance coverage and investments as well as some estate tax benefits.

Comparing life insurance and small business is like comparing apples with durian, which are worlds apart. Further, the issue of risk and return comes to play in this concern and business is always risky and speculative. Business is also where you can really earn a lot of income and it can substantially grow your capital, albeit all the risk it carries. I’d like to look at insurance as a way to protect future income while business or investments is a way to maximize income. Will business be better as an investment? Definitely! A good business idea coupled with a good business plan and impeccable timing can make your capital grow bigger and faster than paper assets. But, as the saying goes, the higher the yields, the higher the risks. Most start-ups fail and the percentage of those that succeeded is quite disappointing. Yet, I believe we should take a wee bit more risk with our money and be a tad more entrepreneurial—as cliché as it sounds, no guts no glory. Just be prudent and know what you are getting into.

Know your objectives. If your objective is substantial capital gain or adequate provision of income, life insurance products are not the answer—business or other investments are. If your objective is moderate capital growth with financial protection against life’s risks, then life insurance is something you can consider. Also, life insurance products are long-term in nature.

Should you choose between life insurance and business? I say you may need both. If you have loved ones depending on you and your income, you definitely need to assess your life insurance needs. If you are disappointed with the gains you get from other investments like time deposits or special deposit accounts (yields are lower than inflation) then do consider other investments, small (or large) business being one of them.

Just a friendly reminder: Before letting go of your hard-earned money, investigate before investing; check out your alternatives and if need be, talk to professionals. Remember, prudence is always a good virtue.