Buying Life Insurance in the Philippines
Suck at money? Congrats. You’re part of the 99 percent of people in their 20s floundering when it comes to finance. Adulting is hard, and money is harder—especially when it’s your own and not your parents. My Two Cents is here to break down everything you need to know about finance, business, and entrepreneurship. We’ll tackle all the basics, from how to get a business permit to how to invest in stocks, to educate the fledgling adults on how to not go broke.
Welcome to the idiot’s guide to money. Eighth lesson: Buying life insurance in the Philippines.
We’ve reached new levels of adult. “Insurance” isn’t a word in the vocabulary of people under 22. But as you get older, and (knocks on wood) sicker, you start to see the appeal of life insurance. It’s a promise that your loved ones will be taken care of when you kick the bucket, and everyone wants that. While the idea is appealing, the complicated process is what usually makes people take a step back from actually purchasing life insurance. The tenacity of life insurance agents in malls might also play a part.
Here we’ll breakdown the complicated process so you can find the life insurance policy that fits you.
First off, what is life insurance?
It’s a contract between the client and the life insurance company that states that the client will pay the company a regular fee in return for a large sum of money when the client passes or an event occurs as stipulated in the contract. In layman’s terms, you pay the company a small sum of money every month, and they’ll give your family or beneficiaries a sum of all your payments, plus interest, when you die. Either way, it’s a financial security measure for your loved ones, especially if you’re the breadwinner of the family. If you want, it can also act as a retirement fund for you to rely on once you reach a certain age.
The benefits of life insurance can only be felt after a number of years, so you need to be ready to play the long game.
When should you start?
As they say, start ‘em young. The earlier you start, the better. You’ll have more time to build your wealth and savings, and thus be more financially secure in the future. You don’t necessarily have to get life insurance the moment you get a job considering the small pittance most new employees earn, so the late 20s are a good place to start.
But you should also note that some life insurance companies charge higher monthly fees to those of older age. The older you are, the shorter time you have to live, and the shorter time you have to pay your insurance company. So if you start younger, you’re more likely to have a more reasonably priced insurance contact. Youth is your advantage.
What should you look for when choosing an insurance provider?
First and foremost, your insurance provider should be licensed by the Insurance Commission in the Philippines and have a good reputation. Ask around and find out about the experiences of your friends and family with their insurance providers. Look for a provider that has a convenient, fast, and easy system to navigate. Insurance is complicated, so being able to communicate easily with an insurance agent is also necessary.
Second, look at the financial strength of an insurance company. Take note of the assets, net worth, and net income of a company. This will indicate how financially secure they are. Why does this matter? Because in the event that something bad happens, like a recession or company closure, a financially strong company can still pay back its clients if it has a large net worth or a lot of assets.
What sort of insurance plan do you need?
There are three types of life insurance you need to consider: Term Life Insurance, Whole Life Insurance, and Endowment.
Term Life Insurance is limited to a fixed number of years. Term Life Insurance usually has the most affordable prices, but it’s also the most basic of the types of life insurance. You don’t get any added benefits or investment returns with this type of plan.
Whole Life Insurance covers you until you die. There’s no limit to this type of life insurance and your beneficiaries will receive cash benefits and dividends. Premiums are pricier than Term Life Insurance, but that also means the returns and investment is greater. This is best for young families looking to secure their children’s future.
The last type of life insurance is Endowment, which has features of both Term Life and Whole Life. Endowments have a term limit, but it will provide death benefits if you die after the term limit is up. This can be used to fund retirement, college funds, future hospital bills, etc.
The Philippine Life Insurance Association recommends getting a plan that is more than five times your current annual gross income.
A good place to start would be to get to know the biggest and most reputable life insurance companies in the Philippines. These are: Philam Life, Sun Life, Manulife, Insular Life, AXA Philippines, BPI-Philam, CocoLife, and Pru Life UK. Look at which company you consider the most financially strong, then look into the plans they offer. Compare the plans of your preferred companies based on rates, premiums, benefits, and customer convenience before finally buying life insurance in the Philippines.