What you need to know about Life Insurance and Why you need it
Suffice to say, life has value. However, it is not only intrinsic value but also economic value. Each individual has a value to his/her family and dependents (if any), and that person may be able to earn an income to support him/herself and others who are reliant on that income.
But as time passes, the inevitability of age and wear soon weighs more and more heavily on that person and capacity for work eventually decreases.
Considering the long term and life past working age and towards whatever may come, it would be smart to have something that further ensures financial security in some way just in case something unforeseen happens to that person.
That’s where life insurance comes in as a safety net for the individual’s family, guaranteeing their future even in the event of the said person’s death or disability.
The Three Cases for Life Insurance
1. For Safeguarding One’s Family
Perhaps this is the number one reason why most people would consider getting life insurance. It is a good way to make sure that the family will be in good hands even when something unforeseen happens to the breadwinner that may then see a loss of income to the household. Whether it is a disability or premature death, the family should be able to avoid financial difficulty through the insurance payout.
2. For Savings
Whenever there is money left over from the budget, you would want to save it. While you can indeed put it in the bank, you can also put it in your life insurance to make sure that it can be of good use later on in the event of illness, injury, or other emergencies that may require an immediate source of cash.
3. For Income During Retirement
Upon retirement, there should be a pension that will make life comfortable past working age. Life insurance can serve as a retirement fund as well, making sure that one’s golden years can be as enjoyable and stress-free as possible. This adds to how good life insurance is as a long-term strategy worth investing in.
Classifications of Life Insurance
There are four general classifications, each meeting a specific need. You may choose which class of life insurance suits you best depending on your specifications for best result.
There is according to the nature of benefits being offered, whether they are temporary policies or permanent policies. The former offers protection or death benefit for a limited time, while the latter is insurance for a lifetime.
There is according to coverage, whether it is an individual policy, a joint life policy, or a group policy. Being able to choose how many people get covered lets you invest the right amount of money for the right benefits.
There is also according to participation in divisible surplus. This one is a bit more particular, wherein a policy can either be for those participating in dividends or those who do not share in them.
Finally, there is according to the line of business. This is for businesses, companies, and so on, wherein policies can be either ordinary (mid to high income), industrial (low income), or group. That last one is particularly for employee groups, unions, and the like.
Preparing for Life Insurance
Before you even think of applying for life insurance, you must first perform an inventory of what you own. Take note of the following:
- The money you have in the bank, including payroll accounts.
- Real estate properties, with indicated market value.
- Whatever insurance policies you may already have.
- Investments in stocks, mutual funds, businesses, etc.
- All your liabilities, including bank loans, credit card debts, etc.
Doing this is for you to understand where you are at financially, so make an honest assessment. You can then create your own balance sheet to get a clear picture of your financial standing. Your cash flow must be adequate in order for you to afford to invest in a life insurance policy.
A good rule of thumb is to buy life insurance that is equal to around 5 to 7 times your current annual gross income.
The top five providers in the Philippines are Sun Life Financial, Manulife, Insular Life, Philam Life, and Axa Philippines.
You may also want to look for a competent financial advisor if you really want things to pan out right. You can discuss your current financial status and decide on the best provider and policy with the financial advisor if you really are clueless and/or worried about getting it right the first time.
After that, the application is all about filing the paperwork and getting a hang of the payment process. Once that is all done, pat yourself on your insured back for a job well done.