For us Filipinos, insurance is still considered the least popular choice of investment. This is due to many reasons. Many of us stated that we are still hesitant to invest in insurance because we don’t have enough money. Many want to leave it to fate as they don’t understand insurance terms, which are normally difficult to understand. Some people feel they are healthy and have a lot of time and will need insurance only when they are about to die. The most challenging part is that people consider insurance a scam, a waste of money, and not a means of investment.
Investment in generating returns is the key to building wealth. As you try to evaluate different investment plans, you might wonder whether insurance is a worthwhile investment.
Insurance is a means of guaranteeing protection and safety. Protection can primarily pertain to your life, health, money, property, education, travel, vehicle, and business. It protects you from unplanned and sudden situations like death, accidents, thefts, etc. Insurance is an investment, not an expense. Insurance is beneficial for everyone, as it helps offset costs for a lot of expenses, from school fees to medical bills. Among all things, life insurance is a popular investment as it provides both financial security and financial growth.
10 reasons why OFWs should invest in life insurance
1. Life Insurance comes with low premiums
OFW’s primary reason for working abroad is to take care of their loved ones, especially by looking after their financial needs. To ensure that you will be able to secure your future financial needs, life insurance is something you may consider adding to your financial plan if you are interested in providing a measure of security for your loved ones. Premium payments are usually low, and proceeds from a life insurance policy can be used to pay final expenses, eliminate outstanding debts, or cover day-to-day expenses. It can also fulfill philanthropic goals after your death, as benefits can be passed to your favourite charity.
2. Secure your loved ones
We, as Filipinos are known to say, “bahala na”, hoping that things will have a better result. Leaving everything to fate could prove costly for your loved ones. Living in the present is good, but thinking about the future is also equally important. An accident or an untoward incident can befall at any time. Life Insurance takes care of financial problems your family might face in the event of an unfortunate event that occurs to you, like a fatal accident or sudden death. Understand the terms of insurance by reading it many times and taking the help of financial advisors and sales agents to explain hard-to-understand concepts. Getting insured now will protect your future.
3. Health insurance is not enough
Many Filipinos are averse to even health insurance as they consider themselves healthy. However, Philippine citizens, especially employed people, are majorly covered under Phil Health (Philippine Health Corporation, which implements universal health coverage) or HMO (Health Maintenance Organisations). They ensure the majority of the medical bills are covered in the event of an accident or chronic disease. But both of these health insurances offer assistance only for health emergencies. They are different from life insurance.
4. The advantages of starting early
YOLO! as the majority of Filipinos would describe their way of life. We tend to think that we still have time for everything. However, it’s different when it comes to insurance. You may be younger and healthy, but if you opt for a life insurance policy at a young age, you get more coverage and higher returns. The cost of getting a life insurance policy at a young age while you are in your mid to late 20s can be lower compared to when you get insurance later in life. This is because, by this age, one would already have enough income to support current needs and a little extra to invest in future needs. The policy will also secure your family in case of any eventuality. The decisions you make today will affect you tomorrow.
5. Insurance with investment options
Many life insurance products also offer investment options. If you love risks, you opt for potentially high returns governed by stock market movements. Some insurance plans guarantee a sum assured. Such plans keep your money safe from market conditions. Reputable insurance companies also offer bonuses, helping your investments grow. The returns from life insurance plans can help you meet your life goals, such as children’s higher education, marriage, and financial freedom after retirement.
Payout is determined by the performance of the underlying securities in the policy. Variable life insurance policies are considered more volatile than standard life insurance policies and are ideal only for those who take additional calculated risks.
6. There are many accredited insurance companies
Scammers are just around the corner, even in the insurance industry, so it is just normal for people to think twice before taking insurance. The insurance industry in the Philippines is regulated by the insurance Commission and only licensed agents and advisors are allowed to sell insurance and investment products. It is recommended to do some research before selecting an insurance agency and transact with agents and advisors from credible and accredited insurance companies.
7. Financial Security
Traditional life insurance, also known as whole life insurance, money back insurance or endowment insurance, provides multiple benefits like risk cover, fixed income returns, and safety. These are considered risk-free on account of their fixed returns in case of death or maturity of the term. It never runs out, and upon the inevitable death of the contract holder, the sum of money assured to a policyholder when a claim is accepted (Payout) is made to the contract’s beneficiaries. It gives you and your family financial security in emergencies and prepares you for unforeseen expenses. These policies also include an investment component, which accumulates a cash value that the policyholder can withdraw or borrow against when they need funds.
8. It instils the habit of saving
A lot of us couldn’t start on any investment because it seems expensive, however, insurance allows you to start on investment with a very minimal amount. Since you need to pay the life insurance premium amount on time to keep the policy in force. This creates discipline in payment and inculcates the habit of saving in you, as you want to spend less to make sure premium payment is ready on time. This motivates you to save more and build up the funds for your future needs. Late payments can result in the termination of the benefits and coverage provided under an insurance policy by the policyholder (lapsation).
9. Saving on Income Tax
You can claim tax relief up to a certain level based on the premiums paid for your life insurance and health insurance policies.
The proceeds from life and health insurance are not usually part of the gross income and are hence can be exempt from taxes. These benefits, not generally found in other investment products, can reduce your income tax liability and increase your savings.
10. Peace of mind
Life Insurance gives you peace of mind as the needs of your loved ones will be met in case of any emergency. It safeguards your family against economic challenges in case of an eventuality. If used properly, it can also help you achieve financial stability. Insurance may not be a direct investment product, but it is an essential tool you should include in your investment portfolio.
