Nabentahan ka na ba ng life insurance o may nagbebenta ba sa iyo nito ngayon? Many of us have been sold life insurance and some buy it without a clear purpose. All we know is that life insurance allows us to leave behind a sum of money to our loved ones when we die.
This is also my experience. When I had a child, financial products like life insurance suddenly became relevant. What if mamatay ako bukas anong mangyayari sa anak ko? So when someone approached me to buy a VUL life insurance, I used my savings for it.
Types and Terms of Life Insurance
Some life insurance like the one I purchased can be a one-time purchase and have an investment component. This means that the money you put into the product will participate in the stock market. As long as you do not remove or withdraw your investment, you can enjoy the life insurance benefits. This benefit is usually a lump sum amount that your beneficiary can claim upon your death. The amount must be greater than your investment, some institutions offer 125%, some higher.
Other life insurance products are term, parang prepaid load. You will pay x amount to be covered for 1 year and when you die within the year, your beneficiary can claim a lump sum amount. However, if you die after your term insurance expires, wala ng makukuha ang pamilya mo.
There are other types and products that bundle life insurance component with them. Pwedeng health + life insurance, investment + life insurance, at iba pa. Para malaman kung ano ang maganda para sa iyong pangangailangan, dapat isipin muna kung ano ba ang gusto nating magawa ng life insurance. We need to go back and review what we want our life insurance to do for us when we die.
Purpose of Life Insurance
This is a personal view of what life insurance can be used for. Please consult a registered financial planner from a reputable institution.
1. Funeral expense – for some of us, this is the first purpose we think of for life insurance. We do not want to burden our relatives and our children to ask for donations just so we can be buried properly. Question to ask for this purpose is, how much is your expected funeral expense? Mahirap isipin pero hindi masamang gawin ito. Iba iba kasi ang presyo ng funeral packages at maaaring higit na sa kailangan ang iyong life insurance.
A year after I got my life insurance, someone offered me another type of insurance – yung St. Peter. This takes care of funeral expenses and will take care of all the preparations (hopefully) except if you like to be laid at a private cemetery, then you need to purchase your own patch of land.
2. Replace income and take care of family – when you die, can your family bounce back and recover financially? This is important to ask yourself, especially if you are the bread winner. Take into account how many months (or years) do you think before they can come up with their own way to earn money.
When I die, I want to leave something behind. Normal na na tanungin sa lamay kung “may naiwan ba sya?” at gusto ko ang sagot ay oo.
3. Child’s education – if you die today, will your child be able to go to school? In our culture, it is not unusual for families to take care of children who are left behind by their parents. This is fortunate if all your relatives are doing well and you are in good terms with all of them. Your life insurance can help support your child’s continuing education, the question to ask is – how much would your child need?
4. Payment for estate tax – last but not the least, your life insurance can help settle your estate tax. This is the tax on the property that you leave behind. For example, land aside from your family home, your savings account, and if you have other investments other than life insurance. Did you know? Hindi ito magagalaw ng mga kamag anak mo hanggang hindi pa nababayaran ang estate tax?
With life insurance that is exempted from this tax, your beneficiary can claim this financial benefit without any problems. Siguraduhin lang na maayos ang iyong papeles tulad ng certificate of complete payment, receipts, etc. Ayusin ito habang nabubuhay pa!
Your beneficiary can then use this amount to pay your estate tax and “unlock” the assets you left behind. This should equal about 20% of your total assets.
How big or small should your life insurance be?
Now that we reviewed some of the purposes of life insurance, we can now compute the correct value of our life insurance. For example, if putting in P100,000 in life insurance will give you a death benefit of P215,000 – will P215,000 be enough for your chosen purpose?
If not, then you should add and continue to put in money to enjoy a bigger benefit. If you are using term life insurance, review if your premium will yield the suitable amount for your purpose. You might want to increase or decrease your premium depending on your need.
All of us will die and my belief as a Christian is that we need to die to enjoy eternal life. Death is not all bad, it only becomes unfortunate when we are not prepared. We cannot control everything but we can take steps to prepare ourselves and our family in the event of our demise, this includes financial preparation. Being financially prepared will allow your family to focus on reflecting upon your life and death, receiving compassion from others, and heal emotionally when you pass on.
Do you have life insurance already? What are the areas that you wish to review about it? Share it via comments below 🙂
