I think i've mentioned something about insurance on this blog before. recently though, i received an offer to invest in a life insurance policy that will also invest mutual funds on my behalf. anyway, i knew enough about pre-need industries to refrain from signing the policy on the spot. here's what i learned after i took home the papers and did a bit of reading, as well as questioning my dad:
1. the life insurance individuals usually get is for accidental death. so guess what? if you die from some sort of cancer, from giving birth, etc--you're not protected!!! depending on the details of your policy, you might not even be covered if you were murdered! i currently hold an accident and hospitalization insurance; at least they offer something like 2.5% of the premium if i do get murdered, provided that it is proven that i didn't provoke my being so. good to know, huh?
2. the hospitalization that your insurance policy covers doesn't include pregnancies or psych illnesses, among others. so if i have risky pregnancies, i won't be covered. well, at least they do cover cancers and other illnesses in this part.
3. take a look at the asterisks! the first one notes that even if you agreed to pay a certain amount for, say, 10 years, there is a possibility you would be required to keep contributing for longer, should the funds not perform well at the time. so right now, i'm computing in my head that i will contribute a little under Php 200,000 for this certain offer that i got. but in truth, i could end up paying more! my dad has availed of many insurance policies--he got one which he supposedly had to pay over 20 years but because the funds didn't mature or something enough, it was extended to 30 years :S of course, let's hope that this won't happen. because if it doesn't then you would have availed of a bargain. see, my annual accident and hospitalization insurance costs me around P 2,400. but if i pay, say, P110,000 for life insurance with pension and live up to the age of 88, i would've been paying P1,700 a year for the same coverage. that means you saved P700 a year for 65 years. and they would give you a little bit monthly when you retire (although it won't amount to the contributions you made)
4. regarding the mutual funds and other stock thingies (sorry, i'm not familiar with the technical jargon), there is ABSOLUTELY NO guarantee. so even if the proposal illustrates the 4%, 8%, 10% interest, there is a chance that your investment could go up--but it can also go down, really really low. however, if providence is on your side, things could also go really well for you. when a certain insurance company became public here in the country, they offered the clients the chance to become stockholders. they did really well at the time, and my dad ended up earning a lot! but if you haven't been living a rock in the last 5 years, you will also have heard of the recession and how many insurance companies have gone broke, leaving their clients broke-r.
5. investing in an insurance policy is exactly like investing in the stock market--only put out what you're willing to lose. 'cause baby, it might not come back to you. however, sometimes calculated risks really do pay off big time.
6. think about your financial goals. that P 20,000 a year could be used for insurance and mutual fund investments, yes. but giving up that portion of your salary could also prevent you from attaining your other goals which would have otherwise helped you move up. also, when you avail of these packages, you're also paying for agents to manage your money. but if you think you can do a better job of it and make it grow more, then why put it there? i have an uncle who is an incredibly savvy businessman. he doesn't have insurance--he channels the money towards his businesses instead, and that's why he gets richer every day.
7. live within your means. sure, you can pay for insurance. but remember, they won't cover you if you die of starvation from trying to save up for that annual fee.
8. assess your needs and responsibilities. does your work put you at risk of accidents more than the average person? are you responsible for supporting anyone? if you answered yes, then i think investing in a good life insurance policy would be advantageous. if no, well, maybe faith is enough of an insurance/assurance.
so, it's completely up to you whatever you decide. i only hope this serves to enlighten you a little bit more, as it did me, and i hope that whatever you choose does work out great for you in the end :D toodles!
