Life insurance Basics
The Modern Filipino’s Guide to Investing in Life Insurance
Life is unpredictable. You can plan your schedule for the next day, but there’s nothing to prevent detours, speedbumps, or surprises both good and bad to change your plans.
Despite this, however, you wouldn’t want to leave the future of your family to chance. Should life’s unpredictable events lead to your untimely death, you could be leaving your family in a difficult financial situation. To protect them, it’s best to be prepared.
Life insurance is a smart investment plan for people in the Philippines looking for practical financial solutions for their family in case of their death. In this article, we’ll explain what every Filipino needs to know about life insurance: what it is, the benefits of investing, and why InLife should be your go-to insurance provider for your family’s financial security.
Why get life insurance?
Ask yourself these questions:
- If something happens to me, can my family continue to live normally and afford all the daily expenses I've left behind?
- If something happens to me, can my family settle all my debts (housing loan, car loan etc.)?
- If something happens to me, can my kids still go to college?
- If something happens to me, can my family survive financial hurdles?
You get life insurance to ensure that your loved ones can continue living even if you're no longer around.
To get a life insurance is to protect, care and safeguard your future. There are several risks in life that hinder the income flow to your family, and life insurance is one of the best instruments to alleviate these risks.
- Dying too soon – Insurance provides money that can take care of expenses associated with the early demise of a breadwinner.
- Living too long – Insurance ensures that in old age, people will not be dependent on their families for their daily needs.
- Being disabled – Insurance will ease the financial pains and difficulties of being disabled.
Life insurance may not be able to prevent these threats/contingencies from happening but it can help in cushioning the financial impact any of them could bring.
Who Needs to Invest in Life Insurance?
Ideally, people who have families or dependents should have life insurance, especially if you are the main or sole person providing income to spend on your family’s living expenses. These include:
- Parents with minor children – If one or both parents die before a child reaches maturity, life insurance can provide a child with financial resources for their education and living expenses until they can support themselves.
- Parents with special-needs children – Some children with special needs may need lifelong assistance even into adulthood. Life insurance can ensure their child has the financial resource to access special care when their parents are no longer around.
- Adults with joint property – If you and another adult (e.g. spouse, fiancé, sibling, business partner) own properties like residential and commercial buildings, companies, vehicles, and other expensive properties, your death may make it difficult for them to continue paying for upkeep, loans, and taxes. Life insurance can allow them to get by.
- Families that cannot afford funeral expenses – The cost of a private funeral in the Philippines can fetch hundreds of thousands of pesos minimum. If you feel like your family can be financially secure enough but may not be ready for the unexpected costs of a funeral, your life insurance can be used to pay for your funeral.
- Young adults with no dependents – Even if you don’t have dependents yet, it may be smart to invest in life insurance now while you’re young and healthy.
How Does Life Insurance Work?
The concept is simple: pay life insurance premiums for a given amount of time, and upon your death, your beneficiaries are covered and entitled to a death benefit. However, this is where it gets a bit complicated since life insurance is different between all policy holders.
Your premium is the money you’ll be paying for your death to remain covered by the insurance company. How high or low your premium is depends on the likelihood your insurer will have to pay your death benefit, or in short: your life expectancy. A healthy 25-year-old with no pre-existing condition, therefore, will have a much smaller premium than a 40-year-old with pre-existing conditions that could give them a shorter life expectancy. Other factors that can affect your premium include:
- Age – Younger Filipinos are less susceptible to diseases and conditions that shorten their life expectancy.
- Gender – Women and men are more prone to certain conditions that could affect their life expectancies.
- Medical History – Those that have been treated for or have a pre-existing health condition may pay a higher premium.
- Occupational Hazards – Some jobs (e.g. driver, engineer in a construction site, electrician) have bigger chances of fatal workplace accidents than other jobs (e.g. white-collared desk jobs).
- High-Risk Hobbies – Heavy smokers and drinkers have a shorter life expectancy compared to those who don’t.
- Larger Death Benefits – Policy holders that want a bigger death benefit for their beneficiaries can expect larger premiums.
What does life insurance cover?
Life insurance has a simple purpose; to help prepare and protect your family financially if you are no longer around. A life insurance payout or death benefit can be used in any way your family sees fit. It can be used as:
- Clean-up Fund – a fund to pay all debts upon death. This can include outstanding hospital/medical bills, burial expenses etc.
- Family Dependency Period Income – a fund to provide income for your family and cover their living costs.
- Emergency Fund – a fund to be used in the event of illness, accident or unforeseen situation that may arise in your family.
- Education Fund – a fund to provide education for your children.premiums.
What Type of Life Insurance Is Best?
There’s really no one type of life insurance that’s best for everyone because people have different needs and preferences for the kind of insurance they’re investing in. So, it’s best to research all your options before choosing one.
- Term Life Insurance – Lasts for a limited number of years, usually between 10 to 30 years. If your policy expires and you don’t pass away from unfortunate circumstances, your premiums are returned. A zero-risk investment that gives you and your family some peace of mind. This is a good option for those looking at death benefits as their income replacement for their family during their working years.
Learn more about InLife’s Basic Cover Plus and how you can get double coverage: pay for 10 years and be covered for 20 years. Get your money back plus a maturity benefit.
- Permanent Life Insurance – You pay premiums for the rest of your life until you pass away. Provides lifetime coverage.
- Level Term – Pay a fixed premium every year from start to finish.
- Increasing Term – Your premiums get bigger as you get older.
- Single Premium Payment – Pay one single premium up front instead of making smaller payments.
- Whole Life Insurance – Similar to permanent life insurance, but it accumulates cash value.
- Universal Life Insurance – Similar to whole life and permanent life insurance, but premiums and death benefits can be adjusted.
- Final Expense – Small life insurance meant for funeral expenses, though beneficiaries aren’t required to use the death benefit on this.
When is the Best Time to Get Life Insurance?
The younger and healthier you are, the easier it may be to secure the life insurance policy that you want. If you have a partner, spouse or family who may struggle to cope financially, then acquiring one today can give you the feeling of security.
I already have life insurance coverage at work, do I still need to get one?
If you have a family to support, the insurance provided by your employer or the company you work for may not be enough. What happens to that coverage if you change jobs? If you leave the company, you may have to forfeit the coverage you have. Having a personal policy can ensure your family has adequate protection from the unexpected.
How much life insurance do I need?
It is important to determine the value of your life insurance in terms of what it will take for your family members to be financially independent in your absence. To estimate that amount, add up all expenses and calculate future liabilities that your family will have to pay in your absence. Your family's needs and goals must reflect in your insurance plan.
Check out Insular Life's financial calculators to help you determine your insurance needs and financial goals!
Is Life Insurance a Good Investment?
Life insurance is a good investment for the modern everyday Filipino who have people they want to protect financially even after they pass away. Depending on the type of life insurance you invest on, if you’re investing on the right type of insurance for your needs, you and your family can benefit from the safety blanket life insurance investments provide.
Unlike other investments, life insurance doesn’t fluctuate in value unlike other forms of investments. Your beneficiaries’ death benefit depends on how much premium you pay and not like investments that depend on the current state of the market.
Why Choose InLife as an Insurer?
As the first and largest Filipino life insurance company in the Philippines, we know a thing or two about providing beneficial life insurance to everyday Filipinos. We have over a hundred years of experience in financial protection, providing you with everything you need to give your loved ones a good future and your own peace of mind for the future.
We're here to help you plan ahead, every step of the way. Talk to an InLife Financial Advisor today.