Do I Really Need to Purchase Life Insurance if I Already Have That Benefit From My Employer?

Most Filipinos in the working class are employees. And since a very common benefit from employers are life insurance and health cards (HMOs), the need to purchase a separate individual life insurance is no longer necessary, right?

Besides, if one already own a car, why does he need another one? That’s luxury! So if I already have a life insurance policy from my employer, why would I need another one?

WRONG.

Let’s put it this way (oh I love metaphors!).

Does having a job necessarily say we have enough resources to sustain our lifestyle?

Not necessarily. Few questions needed to be answered. First, how much do we earn? Second, how much do we spend? Third, how far do you want to go with life?

Or say you have one set of clothing (shirt, undergarment, pants, etc…). Does having a set means you have enough? Obviously not since you needed to be “covered” for the rest of the week.

For both comparison, answering the question “How much do we need or how long do I need it” is very crucial before we can say we have enough.

Life Insurance is not different, and definitely investments (but let’s reserve that on a different conversation).

Understanding the Need

Life insurance plays different vital roles in the way we plan our finances. We have to understand that the question is not if we have life insurance, the question is how much coverage do we have.

Let’s take a look of the most common uses of life insurance to help identify whether what your company provides is enough.

Life Insurance for Income Replacement

Alright, before you leave this page after reading yet another financial jargon, allow me to explain what this alien term means.

Income Replacement generally refers to the ability of life insurance to provide income to the family during an untimely death of the family’s breadwinner. Life insurance “replaces” the lost income of the breadwinner caused by an untimely death..

Now, say your company gives you P500,000 life insurance benefit, will that amount continue to feed your family, pay the bills, bring your children to school, and shoulder their lifestyle in the next say 5 or 10 years.

If you answer no (and I’m sure you will), then adding up more life insurance coverage is necessary.

Shouldering the Cost of Death

Everyone is different, we have different lifestyles, different views in life, different likes and dislikes, and a very long list of things we do differently.

There are two life experience that we are 100% sure that we share – we were born, and someday, at our own time, we will face death.

For people who are in the stage wherein they are still building their wealth, life insurance provides a safety net to ensure that an untimely death will not compromise the journey to financial independence of the family left behind.

Simply put, we take responsibility to fund the costs relating to our own death (morbid, I know, but it’s one thing we should openly talk about). Let us not be a burden to anybody else.

Now, does your P500,000 life insurance coverage from your employer would suffice the cost of death? Well, studies say it could take around 1M to 1.5M to cover the cost of death in the Philippines.

Protecting the fruits of your Hard Work – Your Assets

There’s one scary thing about dying with too many assets named after us. We call these horror Estate Taxes (Alright! I might be exaggerating too much).

When a person dies, all the assets/properties he have accumulated over his lifetime will be frozen by BIR until appropriate taxes are paid be the heirs. We refer to these taxes as Estate Tax.

“Frozen” means your heirs won’t be able to access your bank accounts, investments, and real estate properties. Without having the ability to access your assets, how could they be able to pay the Estate Tax?

That’s where life insurance comes in.

Using the same example, is your P500,000 life insurance coverage provided by your employer enough to pay the estate tax? Let’s put it this way, if you have successfully built your wealth through your lifetime and have accumulated P20,000,000 worth of assets (savings, investments, and real estate), P500,000.00 is not enough.

At most, you’ll be needing P4,000,000 life insurance coverage.

Add the fact that your life insurance coverage from your employer usually does not extend after retirement.

Now, is having life insurance benefit from your employer enough?

Given the above considerations, it’s not in most cases.

Having a life insurance benefit in your company doesn’t necessarily mean you have enough. You are dressed today, but not for the rest of the week.

Remember that the question is not if you have life insurance. The question is how much life insurance coverage do you have.

In the next articles, let’s talk about how to compute the ideal life insurance coverage that you should have in order to have a solid financial plan.

Preparation: Winning Half of the Cancer-Stricken Battle (Critical Illness Insurance)

It’s a usual scene every morning wherein my sister wakes me up for breakfast to get ready for school. That’s the perks of being the younger brother in my family (and having an elder sister) – she wakes up early and prepare breakfast (well, until it’s my turn to do the same for my younger brother).

I was 11 years old.

But that morning was different. My sister woke me up in a different tone.

“Gising na! Gising!” I can still remember her sobbing while shaking me from my sleep.

“Wala na si Daddy. Patay na sya!” she said in a trembling voice.

This is a common scene in a family where a loved-one passed away. A story depicted in many movies, and tv shows.

To some it’s a story being told for lessons. To some it’s a life experience where one draws strength from.

And yes, this is my story – the life experience of my family – surviving the death of a cancer-victim father. And yes, we are survivors too!

Cancer is Real (and is Prevalent)

According to the Philippine Cancer Society, 1 out of 1,000 Filipinos have cancer. That’s the reason why most of us know someone, directly or indirectly related to us, who suffer with the said disease.

Cancer Statisitics in the Philippines

One part of that fact is this – regardless whether we have a family history of cancer or not, we are all vulnerable.

According to the rates in 2008, 13 out of 100 males and 12 out of 100 females in the Philippines would have had some form of cancer if they would have lived up to age 75. Ten out of 100 males and 7 out of 100 females would have died from cancer before age 75.

Source: 2010 Philippine Cancer Facts and Estimates

…And It Is Very Expensive To Treat

I was young back then. The truth is, it’s only just recently that I’m able to glimpse the hidden sacrifices and sufferings hidden in my youth.

My mom has a mole on her feet and yes, she is a living testimony – that people with mole on their feet loves to travel. Well, in her case, she really loves to move around.

And yup, I’ve been her personal driver during the past few months.

During one of those drives, she told me this story that really made me cry inside but have to fake with a tease and a laugh.

That was the day when my mom have to leave home and take care of something.

Dad kept asking where she’d go. She said she just have to fetch something at school (she’s a teacher).

She picked up a tricycle, and rode to her destination.

She knew that it’s just a matter of time. She’s strong, but she, just like anybody else, a human, crying inside while on her way to purchase that final resting place of her husband – a coffin.

It will take more than a million pesos to decently battle the disease. More often, people with cancer choose to face death than to leave their family with further uncertainty in the future.

As I was trying to research the cost of being a cancer survivor, I found this article by Ellen Tordesillas published during 2006 – nine years ago.

The amounts she presented were expensive back then, moreso today.

What You Should Know…

Physical, emotional, psychological, and financial pains.

We can do nothing on the first three, in most things in life, these three pains are always there. But we can minimise (or even extinguish) the impact of the last one.

Do you know someone who prays to experience cancer, or any other critical illnesses? No one.

But these diseases continue to strike, regardless of nationality, upbringing, and financial/social status. We are all equal in this regard.

The truth is, only those who have the resources to pay for the treatment become survivors of the disease. The rest become survivors of the victims (those people who are left behind).

Planning Ahead

During his battle for cancer, he had four children at school. Three were studying at a private school at St. Paul School (Kinder, Elementary, and High School), and the eldest attending his college at Mapua Institute of Technology.

Mom is a retired public school teacher. Back then, I can only imagine how she juggled her small income with all of those expenses, how she took on the hardship of asking help from whatever source possible (friends, relatives, charities).

My dad died during 1998 – a year were information were not as readily available as today.

He had no Life Insurance, no Health Insurance. Mom and my eldest brother were paying debts years after his death.

These experiences undoubtedly made each one of us stronger. Perhaps we are where we are today because of these life experiences.

But, in this age of awareness, we have to understand that it’s our responsibility to prepare. That our negligence to act could be the root of sufferings of the people we dearly protect – those people who are the reasons why we do what we do.

One way to prepare is to ensure that we are covered with critical illness through Health Insurance.

Prepare not because we expect things to happen. Prepare because we cannot leave anything to chances.