Why You Need To Get Life Insurance ASAP (MoneySmart 2020)

Why You Need To Get Life Insurance ASAP (MoneySmart 2020)

Life insurance is an essential part of good financial planning, but not everyone enjoys talking about it.

There’s not the usual excitement like when buying a house or a car. People usually brush off talks about it or simply put off buying one.

Until a serious, unexpected, and devastating life event happens, and usually it’s already too late.

If you want financial protection and security for yourself and your loved ones but are still on the fence, read on and find out why you need to get life insurance today.

First of all, what is life insurance?

A life insurance policy is a contract between you, the policyholder, and a life insurance provider.

You agree to make regular payments of a set amount on specific times. The life insurance provider agrees to pay out the monetary benefit to your beneficiaries upon your death as stipulated in the contract.

Depending on the type of life insurance you have, you can also receive monetary benefits when you suffer a major injury or get diagnosed with a critical illness.

What are the different types of life insurance?

There are two types: term and whole life insurance.

Term life insurance covers the insured for a fixed amount of time. For example, you can purchase term life insurance products with coverage of 1 year, 5 years, or 10 years, or when you reach age 65.

Whole life means you are covered for your whole life, hence the name.

When should you buy life insurance?

The earlier you get one, the better. Especially if you are the breadwinner in your family.

It’s advisable to get life insurance when you’re still young and healthy. Premium payments are less expensive compared to when you’re in your forties and already having a few health concerns.

Some financial advisors will also recommend that you get insured when you get married and start a family, when you’re secure in your job, or when you already have assets and savings.

How much life insurance coverage should you buy?

This will depend on your personal and financial situations. But in essence, your life insurance coverage should be able to replace your income and cover your family’s present and future expenses.

You should aim for 7 to 10 times your income. But you can always pay more if you can afford to.

Why should you get life insurance?

For your peace of mind

If you have young children, siblings, or ageing parents as your dependents, you can stop worrying about what will happen to them if something happens to you.

When you’re insured, you can rest easy knowing that your loved ones will receive an income replacement in the event of your passing.

You won’t have to worry about how you will deal financially if you meet an accident, suffer an injury, or get critically ill.

Life insurance will provide both short and long-term benefits when you face life’s uncertainties.

For your loved ones

Getting a life insurance policy may be a financial decision. But it’s also an emotional one because you are really doing it for the people you love.

If something happens to you, you will not leave them in a bind. In a way, you will still be taking care of them and fulfilling your responsibilities even if you’re already gone.

With life insurance, you are protecting them from catastrophic financial losses that can happen when you pass away unexpectedly.

For more time and options

When a breadwinner suddenly passes away, loved ones who are left behind usually have to make quick and tough decisions. And since they are still grieving for their loss, they’re not yet in the right place emotionally to be making good choices.

With life insurance coverage, the bereaved will have time to adjust, cope, and make decisions that will be beneficial for them for the long-term.

They can pick up the pieces and take things one day at a time without worrying about how they’re going to pay the mortgage or the kids’ tuition.

For financial assistance when you need it most

The benefits of your life insurance policy will be released immediately when you need it. If your policy has a hospitalization or critical illness rider, you can use it to pay for treatments and other hospital expenses so that you can only focus on getting better.

For living benefits

Life insurance not only provides death benefits for the insured’s survivors but living benefits to the insured as well. There are different life insurance products which you can purchase that will give benefits for other financial emergencies, for your children’s education, or for your own retirement.

For your financial stability

You may be working for several years now and still haven’t saved up for your future.

It’s very easy to spend on shopping, travel, and other material possessions. But as you grow older, you will realize the value of saving while you’re still young.

With life insurance, you can get a headstart on the future that you want for yourself and your family. Putting your hard-earned money in a life insurance policy will give you that sense of fulfillment that you’re not wasting a single centavo.

You are, after all, investing in your child’s future education, your future business, or your retirement.

Things to consider before getting life insurance

How old you are

Life insurance premiums cost higher as you grow older. This is because the risks for insurance companies to pay out benefits from life insurance also get higher with every passing year.

How financially secure you are

Life insurance premiums are not exactly cheap. Depending on your amount of coverage and supplementary benefits, it can range anywhere from 25,000 PHP to as much as 60,000 PHP per year.

You can pay for it monthly, quarterly, semi-annually, or annually, but this is for a period of several years. This is why you need a stable income to pay your premiums and make your payments on time.

What kind of lifestyle you have

If you smoke, drink, or engage in extreme sports, you may be asked to undergo a medical exam before you get approved for an insurance policy, or you’ll just have higher premiums.

What your life goals are

Do you plan on getting married and having children? Do you want to buy your own house? Are you planning on being employed until retirement or do you want to put up your own business someday? Also, what age do you want to retire?

It’s important to know what you want to happen in your life so that you can determine what kind of life insurance to get and how much your coverage will be.

Final Thoughts

It may seem very complicated at first, especially if you know nothing about how life insurance works. This is why you need to speak to a financial advisor that you can trust to explain the nitty-gritty of it all.

Don’t be afraid to ask questions. Be honest regarding your financial situation so that you can get the best insurance package for your needs and your budget.

Try not to wait too long, though. The longer you put it off, the higher your premiums will be, and the more you’ll feel that paying your insurance is a financial burden.

Check for accredited insurance companies in the Philippines on the official website of the Insurance Commission. You can be guaranteed that all insurance companies listed here are reputable and financially strong.