The Ultimate Guide in Getting Life Insurance in the Philippines

We already know that Life Insurance should always be part of your personal finance strategy, everybody is talking about it, and all personal finance gurus are recommending it.

However, how should you start your journey in getting one?

Let me guide you through the things you should do, step-by-step.

understand what you need

Before anything else, there are few things you need to ask yourself to ensure that you will get what you need.

Have an inventory of what you have.

To have a better understanding on what you need, it is best to have an inventory of all assets and liabilities that you have.

These inventory should include the following:

  • Cash In Bank (all banks including payroll accounts)
  • Real Estate properties (indicate a market value)
  • Insurance Policies
  • Investments (Stocks, Mutual Funds, Businesses, etc…)
  • Liabilities (bank loans, credit card debts, etc…)

Be honest to yourself. These information will help you understand where you are financially. As you will notice, you’ll be creating a personal Balance Sheet.

Understand your cash flows – your income and your expenses.

First step is to list all your income sources, no matter how small. The purpose is to have the most accurate understanding of how much money is coming in.

Next is to classify your expenses. Separate fixed and variable expenses.

Fixed? Variable?

Fixed Expenses are those expenses that you can no longer decrease, well, because they are fixed. Example of these expenses are your monthly rent, car amortisation, postpaid plans, cable tv bills, etc…

On the other hand, variable expenses are those expenses that you have control. These are the expenses that you may increase or decrease . Example of these expenses are your allotment for food, transportation, excess of your postpaid plans, etc…

Identifying your variable expenses will allow you to understand how much you can adjust and bring into savings.

Identify how much you can set aside on your monthly budget.

Upon analysing your cash flows, identify how much the maximum amount you can save on your monthly budget.

If you are happy on your current cash flows, that’s good.

If you wish to minimise further your variable expenses, then check how much further you can save.

At this stage, you should already know how much you can set aside.

List down your financial goals

Money is just a means to an end, a tool that we use to fund some life’s needs, wants, and experiences. That’s why it’s very important to identify what we are really trying to accomplish so that we’ll know how much we are targeting, and what we can do to ensure we meet those goals.

In identifying financial goals, it’s best to classify their term – either short term, medium term, or long term, and find balance in all of it. You may use the following as a guide:

  • if the goal is targeted in 5 years or below, classify them as short term
  • if the goal is targeted in 6 to 10 years, classify them as medium term.
  • for goals that are targeted in more than 10 years, classify them as long term.

In this goal setting process, always allot something for your retirement, and if you have children, an education fund for them.

Identify how much life insurance coverage you need

It’s very important to identify how much coverage you need to ensure that you won’t be purchasing more than what you need.

For a basic computation, you may get your annual expenses and multiply that by 10. What comes up is your ideal life insurance coverage which you should be trying to meet.

If you currently have debts, add that, and subtract any existing life insurance coverage you may have.

Allot a specific budget for each goal that you have

Prepare an initial budget on how much you’ll be allotting for a specific goal to ensure that you have something set aside for each of the financial goals you want to achieve.

select life insurance company

Now that you are done identifying where you are financially and the resources that you have to plan for the future, it’s time to check out the life insurance company/s that you may want to transact with.

One way to do it is to visit the website of the Insurance Commission and get a list of legitimate Life Insurance Companies here in the Philippines.

For easier and more reliable reference, just select from the top companies.

  • Sun Life Financial
  • Manulife
  • Insular Life
  • Pru Life UK
  • Philam Life
  • Axa Life

You can never go wrong with either of these companies.

Look for a Financial Advisor

To be able to transact with the Life Insurance Company that you have chosen, you need to find an Insurance Advisor/Financial Advisor/Insurance Agent.

You may know a friend, a relative, or a family member who is an advisor. If not, you may send us a Request for a Life Insurance Quote and we’ll send a Financial Advisor within your area. 

The job of an Insurance Advisor is to analyse your current financial situation and your goals and match financial products that could help you achieve your financial goals.

The question is, what should you be looking for in an Insurance Advisor?

Here are some characteristics that you should consider your Insurance Advisor should have.

Competence

The main task of a financial advisor is to understand your unique personal circumstances and develop a program that will help you achieve your financial goals.

Competence pertains to knowledge about personal finance as a whole and knowledge on the products they represent.

If possible, look for an advisor who distributes both Life Insurance and Mutual Fund products to provide you more options – but not really a deal-breaker.

Visibility and accessibility

An insurance advisor will become your representative in the company that you chose. It is best that they are always accessible to address your concerns – either personally, or through their staffs.

Although customer services of the insurance company that you may choose are always available to help, it’s easiest to talk to the advisor who helped you with your policy (or their staffs) to speed up in addressing your concerns.

Trustworthiness

This goes without saying.

Since this is a conversation about money, it’s mandatory that you trust the people you transact with.

Just ensure that every transaction with a financial advisor is supported by provisional receipts issued by their respective companies.

BONUS Consideration

Find an advisor who is trying to share their knowledge and expertise through their own websites or other platforms. More often than not, these advisors are committed to bringing themselves to the public for visibility, accessibility, and exhibition of their competence.

These advisors are keeping a reputation by being a public image, thus could be very trustworthy (not a guarantee though).

what to discuss with a financial advisor

As I have mentioned earlier, the role of an insurance advisor is to identify where you are currently in your finances, understand what are your current resources to help you move forward with your financial goals, and develop an actionable program that will suit your personal circumstances (preference, budget, behaviour, etc…)

The job of an insurance advisor is to keep asking. Here are some questions he/she will ask during your meeting.

  • Do you have any existing life insurance policies?
  • Do you have any investments? (paper assets, real estate, businesses)
  • Do you have children? How old?
  • How much is your monthly income? Monthly expenses? Monthly savings?
  • How are you managing your finances?
  • What the other assets you may have? Any liabilities?

As you will notice, the answers to these questions are present in your personal Balance Sheet and Income Statement.

You may answer these questions, or you may not. It’s up to you.

The ideal scenario is that you already have computed what you need (kindly refer to your computations in section 2), and how much you can shell out monthly, quarterly, semi-annually or annually, for the said policy.

You can just send these information to your insurance advisor so he/she can create a program that will fit your budget and preference.

For better understanding and in order for you to explore your options, it is best to meet an insurance advisor personally.

Choosing the Best Proposal

As I have mentioned earlier, the role of an Insurance Advisor is to understand your money preference and your needs, then create an insurance program around it. We refer to these insurance programs as Life Insurance Proposals or Life Insurance Quotes.

During the course of your discussions with the insurance advisor, you may end up having several proposals on hand that could be overwhelming to review.

Now that’s a challenge. Which one will you pick?

Here’s the general rule: choose the policy that will meet your objectives.

People choose different insurance programs based on their unique individual preference. There is no exact identifier on which is best to choose, but you may just take note of the following proposals that may be given to you:

Term Insurance (most inexpensive but no savings/cash values)

This type of insurance is like a car insurance – you’ll pay for it as long as you want it. It will not accumulate savings or fund values.

Good thing about Term Insurance is that it provides the highest life insurance coverage for the most inexpensive rate.

For some people, what they don’t like about term insurance is that it’s like spending for something without any expectation that they can get something in return.

Endowment Insurance (Life Insurance plus savings but limited duration)

Aside from the basic life insurance, Endowment Insurance provides a savings component that gives the policyholder a specified amount after a specified year – say you’ll be receiving P50,000 starting the 10th year upto the 20th year.

You’ll also be entitled to yearly dividends.

This proposal is more pricey than term insurance and offers a very limited life insurance coverage period, usually 20 years. Unlike the first proposal though, you’ll be receiving a lump sum of money at the end of the term, usually higher than what you will be paying for the whole policy.

Whole Life Insurance (Life Insurance with Savings, for life)

Very similar to Endowment Insurance, but this insurance policy last for a lifetime, well at age 100.

It’s a bit pricey, same as endowment, but over time, you’ll get what you have invested, slowly.

Variable Universal Life Insurance (Life Insurance with Investment on stocks and bonds)

This life insurance proposal is a combination of life insurance and mutual funds. I have written great details about this type of life insurance here.

Choosing the Best Proposal (2)

Once you have already decided which proposal to pick, you may start the application process with your insurance advisor.

Here’s how it will all go:

Fill up the application forms.

Usually, the only requirement that will be asked from you is the initial payment, and a copy of one valid government ID. Be sure to have those ready.

For payments, there are usually different mode of payment available – monthly, quarterly, semi-annual, and annually.

Be sure you get a provisional receipt from your insurance advisor.

Also, you’ll be issued a Certificate of Temporary Life Insurance that signifies that your life insurance is temporary effective until the policy is approved. This just means that even if your insurance application is still for processing, you’re already insured, subject to restrictions set individually by each insurance company.

Reminders

Ensure that you declare everything that needs to be declared – medical conditions, history, smoking habits, etc…

Failure to declare these things might cause headaches in the future for your beneficiaries. You may refer to the Two-Year Contestability Clause.

Also, if you’re an OFW, ensure that you are signing the documents within the Philippines. Signing application documents outside the Philippines might cause you troubles in the future.

The Insurance Advisor submits your application to the insurance company’s Customer Centres

From the point of submission to point of approval of your insurance application, it will take approximately 2 to 3 weeks to gain approval, depending on the life insurance company.

In between, there could be additional requirements to be asked by the approving departments of the insurance company (aka underwriters). You might also be asked to undergo Medical Exams.

Don’t worry about anything. Any subsequent procedures will cost you nothing. Some people take advantage of these things to check where their physical health.

Once your application has been approved, you will be issued a policy contract.

Investing In Life Insurance in the Philippines

Understanding Term Insurance and Variable Universal Life (VUL) Insurance

We all know that life insurance is an indispensable tool in planning our finances, you’re done with that.

One problem though, as you begin checking out the life insurance that you’ll be getting, you’re starting to get overwhelmed on the many choices that you have out there – Term Insurance, Variable Universal Life, Whole-life, and Endowment.

The question is, which one?

Confused? Let’s talk about each one of them, starting with the two types.

Two Types of Life Insurance

1. Traditional Life Insurance

Life Insurance has been a part of financial planning for several centuries, where the first policies were taken out in the early 18th Century. It had evolved so much back then.

Traditional Life Insurance are the type of insurance where our parents and grand parents are familiar with (they are, well, traditional). Kinds of Life Insurance here in the Philippines that fall in this classification are the following:

  • Term Life Insurance
  • Endowment Life Insurance
  • Whole-Life Insurance

These types of insurance may generate cash values and/or provide dividends.

2. Variable Universal Life Insurance

The evolution of life insurance has lead to the creation of Variable Universal Life Insurance, popularly referred to as VUL.

Since the introduction of VUL to the market, its acceptance lead it to become the best-selling Life Insurance policy during the past few years – taking 80% to 90% of life insurance policies sold.

VULs are popular for combining the protection brought by Life Insurance and the ability to grow your money through investments through Managed Funds

Confused?

Let’s dig deeper on two types of policies – Term Life Insurance and Variable Universal Life Insurance.

Understanding VUL & Term Life

Term Life Insurance

Plain vanilla Life Insurance – no frills, no complexities, just life insurance, period.

Term Life is the simplest type of Traditional Life Insurance, or in all types of Life Insurance in general. It does not earn dividends, no cash values accumulated, nothing – just life insurance, plain and simple.

The best feature of a Term Life Insurance is it’s inexpensive compared to other types of Life Insurance. It could provide the highest Life Insurance Coverage for a very low budget.

To provide you a perspective on how much it is, a Term Life Insurance for a 30-yr old non-smoker male, a P2 Million Pesos Coverage will cost around P9,300 per year (sample proposal from Sun Life’s SUN Safer Life).

However, since there are no cash values and/or dividends accumulated for this life insurance policy, you will be paying for it all throughout the lifetime of the policy while it’s enforced (active).

Also, premium rates increase as the years progress, how often depends on the design of the policy by different life insurance companies. It could increase every year, every 3 years, or in the case of the sampled proposal above for Sun Life’s SUN Safer Life, every 5 years.

Is Term Insurance for you?

Here are some profiles that fits perfectly the policyholders of Term Life Insurance:

  • You have a low budget and a very high need of considerably high life insurance coverage
  • You have short term needs of high life insurance coverage, e.g. used as Mortgage Redemption Insurance (MRI) for housing loans, or to protect your children to ensure whatever happens, they’ll be able to study, etc…
  • You opt to manage investments and savings separately from insurance – implementing the Buy Term Invest the Difference Strategy, often referred to as BTID

Variable Universal Life Insurance

Popularly known as VUL.

In the simplest context, a VUL is a combination of Life Insurance and Investments on managed funds, e.g. Mutual Funds (if you are not familiar on how managed funds work, you may check out the video that I have created here).

The Life Insurance portion is actually a term insurance, identical to what have discussed above.

Once we understand the separate concepts of Term Insurance and Managed Funds, understanding VUL is a breeze.

Two Types of VUL

Should you find yourself in a position wherein you’re inclined in getting a VUL, there’s one thing you should know – there are two types of them: Regular Pay VUL and Single Pay VUL.

Single Pay VUL (SPVUL)

As its name implies, this type of VUL requires a one-time pay investment – usually around P50,000 and up, depending on the insurance provider.

Single Pay VUL focuses on investment with a very minimal life insurance component. It is an insurance product in form, but really, an investment in substance.

I have dealt a very detailed explanation about SPVUL on an earlier blog post. You may check it out here.

Regular Pay VUL

If SPVUL focuses on investment, Regular Pay VUL “generally” focus on Life Insurance.

I used the word “generally” because it’s still flexible enough to focus on investment or life insurance, depending on how it is designed.

For a comparative analysis, let me show you some differences of Term Insurance and Regular Pay VUL using the same profile that I have used in the Term Insurance example above.

Term VUL
Annual Premium at age 30 9,300.00 44,160.00
Annual Premium at age 60 21,650.00 44,160.00
Estimated Fund Value at age 60 @ 10% Compounded Rate of Return 5,863,942.00

Please note though that this is not an apples-to-apples comparison. I showed this table so I can illustrate the differences between the two. For it to be comparable, you need to compare Regular Pay VUL vs. the BTID strategy. For more info, check it out here.

In the table, you may be able to spot some differences:

  • Term Insurance is way cheaper than Regular Pay VUL
  • Annual Premium for term insurance increase. Regular Pay VUL’s does not.
  • Regular Pay VUL accumulates fund values (cash values) which can be withdrawn anytime. Term Insurance does not.

Again, I don’t intend to show which is better. The purpose is to show the differences.

Is Regular Pay VUL for you?

Here are some profiles that fits perfectly the policyholders of Regular Pay VUL:

  • You opt to get “something back” to Life Insurance policies that you are paying.
  • You don’t have a considerable budget to go for BTID, but you want to target both Life Insurance and Investment at the same time.
  • You are diversifying your strategies – availing VUL while doing BTID.
  • You prefer monitoring less accounts and combining both Life Insurance and Investments makes it more manageable for you.

Which one is better?

It depends on a lot of factors.

The better choice will always be the one that meet your objectives. Thus, in choosing, it’s best to describe first to your Financial Advisor what you wish to accomplish – that’s the job of the advisor, to find a solution that will meet the requirements of the goals you want to achieve.

Should you wish to receive a FREE QUOTE/PROPOSAL, you may request here. A Financial Advisor will keep in touch with you.

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.

Can An OFW Apply For A Philippine Life Insurance While Abroad?

No.

Few weeks ago, I received an email from an OFW asking for assistance regarding an insurance policy signed abroad. She found out (just recently) that insurance application signed outside the Philippines is not valid.

So, I took action by referring her to an advisor of that company.

Clarissa Ramos, a financial advisor with a similar experience, have posted in Facebook the same, but with a detailed guideline on how she assisted the policyholder.

This could help you, dear OFWs, if you are in a similar situation.

Let me share you this post from Pinoy Insurance Talk.

https://www.facebook.com/lifeinsurancehubph/posts/1653226394909286

To every Filipino who signed their insurance applications and proposals abroad, this is an actual story for you.

A client asked for my help. He wants to know the status of his insurance policy. He learned from Pinoy Insurance Talk Facebook group that signing insurance applications and proposals abroad is prohibited and any insurance policy born out of such is void. Also, that when an insurance policy is void, his family may not be able to claim anything. He got anxious and thought:

1. What will happen if I die during the contestability period? We can never be sure nothing will happen.
2. How about after the 2-year contestability period? Will my family be able to claim this time?

He confronted his agent about it. His agent only offered excuses. He contemplated of inquiring about the matter himself, but his agent told him that he will fix it. Trusting his agent, he did not inquire. However, his agent never did. He decided to do something because he did not want to always be left wondering whether or not his family will be able to claim. He wanted to file a report.

I helped him by drafting his complaint which contained all the relevant facts he narrated to me. I told him all the evidence he needed to prepare to establish the facts we stated in the letter. The good thing about the evidence preparation was that he was able to provide everything I asked that we would possibly need. Finally, I taught him where to go to, who are the people he needed to talk to and how to inquire.

He arrived yesterday from abroad and went to the office of the Insurance Company today to air his concern. Here are the following things he learned:

1. Indeed, the insurance policy is VOID, not just voidable.

Void means that a contract is invalid and has no force or legal effect – it never existed in the first place. Voidable means that a contract is valid and has force or legal effect BUT can later on be declared as invalid.

Why is an insurance policy – the basis of which are insurance applications and proposals signed abroad – void?

Under Article 1409 of the Civil Code, one of the void and inexistent contracts is where it is expressly prohibited or declared void by law. Insurance agents and companies here in the Philippines are prohibited from selling insurance abroad because the license issued to them is good only within the Philippines. Thus, it follows that there cannot be an insurance policy born out from solicitations made by insurance agents and companies abroad.

2. Even if the years pass by, the company will NOT PAY the benefits.

Under Article 1410 of the Civil Code, the action or defence for the declaration of the non-existence of a contract does not prescribe. This means that the insurance company can claim that the contract is void at anytime, if indeed it is void. There is no time limit for the company to raise that. The contract being void, the company can refuse to pay the benefits under the premise that they have no obligation. Do note that in void contracts, the parties cannot be compelled to fulfil their obligations because the very source of those duties are inexistent.

Something to remember: The rules on contestability period only applies to valid and voidable insurance policies.
The Insurance Company told the client that it was a good thing he reported and that he had two options:

1. If he wanted to keep his policy, he can request for a letter of acceptance from Insurance Company which will be heard and decided by a Committee.
2. If he wants nothing to do with his policy anymore, he can request for a cancellation of the policy and refund of all the premiums he paid.

That being said, I encourage everyone to come forward and do what the client did. Do not let your family suffer in the future.

In relation to this issue, I have found this article from Rappler. Let us all be aware so we can really enjoy the peace of mind that we have bought.

You Are Young and Don’t Have Any Dependent: Why Should You Get Life Insurance?

Yes, perhaps this is you…

You are probably starting in your career, and at this stage, you already know that you have to take control of your finances (a proof is that you are actually reading this article).

Congratulations to that!

You’ve got your emergency funds covered, but now you’re confused. Will you go straight to investing, or will you get life insurance first?

It is very crucial to address this bugging question.

Considering you are young with nobody relying on your income but you, why would you ever need life insurance?

“I’ll just invest the money instead of buying life insurance!” This, perhaps, is the voice in your head.

Why Need Life Insurance, Anyway!?

life insurance for yuppies

First and the major reason is about taking responsibility of our own lives.

In most situations, our lives are often interconnected with one another. Especially for us Filipinos who take pride in our family-oriented outlook.

Our actions and inactions particularly about money could directly or indirectly affect our parents and/or our siblings, and sometimes, even our relatives’ lives.

Whenever a member of the family is in a dire need, everyone is usually there, offering moral and financial support. That’s how we love our families.

But that feeds a cycle of a never ending loop, leaving everyone struggling on their finances – while they themselves are financially challenge, they won’t think twice to provide financial support to any family member who badly needs it.

This cycle should stop.

Untimely death should not burden the families left behind. That burden will surely slow down their own journey to financial independence, well, unless you belong to the ultra rich families.

But most of us are on the middle. And nobody wants to be a burden to anybody, either dead or alive.

The second reason is about planning ahead. Since life insurance increase costs as we age, getting one while we are young (and able) is a practical reason.

Life insurance is one of those things in life that you buy but you don’t want to use. Those things that you can’t buy whenever you needed them the most.

Conclusions and Recommendations

As a yuppie, if you have already saved a good amount of money that would cover the costs of “untimely death”, then perhaps you really don’t need insurance.

How much do you need saved up? Well, this article could give you an overview of how much.

The truth is, most yuppies that enters the marketplace does not really have much – given it’s the stage in our lives wherein we are just starting to accumulate assets.

You may be able to afford sustaining your own personal needs, and perhaps consider yourself independent – living on your own income. But, when inevitable events comes up – sickness, loss of job, etc.., the tendency of asking help from parents and siblings aren’t that very far.

Emergency funds, life insurance, health insurance, and your investments would help you cover those inevitable events. Only by then wherein you can proudly say that you are really taking responsibility of your own life.

Why Life Insurance is an Indispensable Part of Financial Planning

We all (most of us) know the mechanics of how life insurance works. You buy it, when you die, you get money.

Simple, isn’t it?

But what’s not a common knowledge is the vast uses of Life Insurance as a great tool of not only planning our own finances, but also, in protecting whatever we had gained over our lifetime.

Let’s talk about them.

Why Insurance is an Indespensible tool

1) Taking responsibility of one’s own life.

I’ve read blogs discouraging single yuppies in getting life insurance, which I think (on my personal opinion) is quite careless and irresponsible.

For one, we should stop the idea that somebody will carry the burden during an untimely death. This thought will keep this country poor.

As much as we can, let’s take responsibility on our needs when we are alive, and try not to pass the burden when we die.

How much does a yuppy who supports nobody need to stack in his life insurance? One good reference point is this article of Pesos and Sense about the cost of dying in the Philippines.

2) Ensuring that life will continue for those left behind.

Head of the family, parents supporting a family, and persons where other people (young or old) depends on. These people needs more life insurance than just by taking responsibility of their own life.

This is mostly referred to as Income Replacement.

Income, what?!?

Alright, here’s the main concept. The moment a breadwinner of the family faces death, it’s not only a loss of the physical body, it’s also a loss of income generated by that individual.

It’s computed by several means. One way is to divide the annual income provided by the breadwinner by an acceptable investment rate of return.

Let’s say the breadwinner is giving P500,000.00 to the family, and an acceptable investment rate of return is 5%.

That will be P500,000.00 divided by 5%, which will result to P10,000,000.00.

That will be the ideal insurance coverage for income replacement, which, once received by the beneficiaries, will be invested in an investment that would yield the acceptable investment rate of return (5%).

At the end of the day, what’s important is that when we say we love our family, death should not end that love.

3) Ensuring debts will not be inherited.

Ever wonder why life insurance is required when getting a Housing Loan?

Yes, creditors use Life Insurance as a sort of a collateral to ensure that debts will be paid, dead or alive.

This is referred to as Mortgage Redemption Insurance (MRI).

4) Keeping your asset, well, yours (or to your heirs)

I’ve heard an interesting statement from somewhere, just can’t remember where.

It says, “If you are purchasing an asset, especially real estate, you should stack up an additional life insurance coverage equivalent to 20% of the Market Value of that asset. Remember that everytime you purchase an asset, you are giving a burden to your heirs/family, 20% of the market value as an estate tax when you die.”

That brings up the topic of estate taxes, which should be seriously considered when an individual is slowly building up his wealth.

Life insurance ensures that cash will be readily available to beneficiaries to pay for the corresponding estate taxes.

Any case, who would want that the fruit of their lifetime hardwork falls only to the hands of the government, auctioned in a very steep discount, just to pay for the taxes?

No one.

5) Leaving a legacy

Perhaps not the best use for Life Insurance, but nevertheless, some people use life insurance as a way to leave instant wealth to their family.

Well, for a fraction of a cost, life insurance proceeds could leave millions to the heirs.

Conclusion

Life insurance is indeed an indispensable tool in our financial planning, and should not be taken lightly. It is very useful in various stages of our lives.

To learn about different life insurance options, it’s best to talk to an insurance/financial advisor. You may request a FREE quote here, our network of Financial Advisors will be keeping in touch with you.

The Conclusion of the BTID and VUL Debate

… I hope.

I was revisiting an old article from my other blog at MutualFundPH.com regarding the arguments I have made about this never ending debate of comparing VUL and BTID.

The fact that the director of the Registered Financial Planners (RFP), Mr. Randell Tiongson, has shared this article and noted it as an interesting gave me confidence that the argument has some merits on it.

And some of my colleagues has been using the same as well. Thank you 🙂

The topic resurfaced [to me] because of the conversations I had with a client yesterday, and the new articles that are coming out from different bloggers lately.

The client is aware of this BTID & VUL debate and was clearly able to make a stand based on the information he got from the web – that he’ll shun away VUL.

We really got hook into the conversation and noticed that we’ve been talking for about 4 hours. He ended up asking proposals for Term Insurance and VUL as well.

Driving towards my next appointment, my mind is running on a few realisation. This is what I wanted to share in this article.

1) Different strokes with different folks

We are different people, obviously.

We have the different diets, we have different hobbies, different forms of exercise, different things we enjoy and life, and so on and so forth…

But nobody wants to be different, in one way or another. That’s why we people tend to group ourselves based on several similarities we might have. And then have a collective opinion [somehow] on some topics…

Something wrong with that? Nothing. That’s human nature.

Some would prefer boxing over karate, some would go for football rather than basketball, and some would invest in forex and get bored in the stock market.

Even stock market investors argue on which is better, fundamentals or technicals.

The same way, some people will choose BTID over VUL, or vice versa…

This leads to my realisation no. 2.

2) We are not meant to be 100% Investment-Savvy Population

We enjoy the market – the ups and downs, the highs and lows. And surely we KNOW what to do during those times (have to separate knowledge and action in this sentence).

But not everyone of us will choose to devote their time on managing their money and learning about investments. Some of us will choose to devote their time on their profession, their vocations, or their calling in life.

Some would prefer taking the time for the betterment of their career, of their personal lives, of their purpose in life…

Some are too busy protecting the country with crimes, some are busy drafting new laws (I don’t know why I included this here), and some are too busy saving lives in the hospital.

At one certain point, we should learn how to stop imposing our personal expectations on the lives of other people (note to self, guilty as charged).

This is the reason why some invest in Forex, some on Stocks, some on mutual funds/UITF, some on VULs, some on their own businesses, some on Networking, and some on their careers as employees.

3) Personal Finance is not 100% logic.

Brian Tracey will often say in his videos, “We are 100% emotional. When we say we are making logical decisions, it just means that we are putting more emotions on that decision compared to any other decisions.”

When I was still a blogger who often find resource materials solely on texts, videos and audios researched on the internet, I must admit that I don’t have the best idea about VUL. I’m a logical person as I’ll always say.

But on the field, talking to hundreds of people individually, I’ve realise that reality is a vast ocean of differences and outlook. That one size will never fit everyone.

That forex is not the best, nor stock market, nor mutual funds, nor real estate, nor VUL and BTID.

They are all good (just in the middle). Best on the right circumstance, and worst on the wrong situation.

People will often make decisions based on emotions – emotions that are often connected on how people behave.

Conclusion and Final Thought

… I should end because I might bore you to death.

Here’s my point.

There will be no end in this debate, like fundamental analysis and technical analysis. But, you can always use them both.

To investors (myself included), we should try to keep an open mind on all options. Whether that be based on instrument – forex, stocks, or managed funds – or implementation strategies, like VUL or BTID.

Opening our mind does not necessarily mean that we have to accept the other person’s argument. It just mean that we are allowing that idea to come in our mind freely so we can process them based on our personal circumstances.

To Financial Advisors (myself included), we should continue expanding our knowledge so that our clients could gain confidence on whatever recommendation we might have to give.

I am inclined to believe that the best personal finance strategy should integrate well with our personality and behaviour. At the end of the day, our behaviour will last longer than in any interest we might have today.