This thread will be about the general concept of life insurance. The features, benefits, values, and advantages it can offer. We may also talk about the risks involved.
NOTE: This thread is
NOT about selling life insurance. Otherwise, if you need to address your personal need for insurance, I suggest you send me a PM, email me, or call/text my mobile.
What is the basic premise for the need for life insurance?
Traditionally, life insurance is protection from the loss of income due to unexpected events such as untimely death, accidents, illness, and disability. This is particularly important for breadwinners. When the breadwinner dies, meets an accident, gets sick, or become disabled, there is loss of income. Aside from the fact that all these fortuitous events imply expenses, one can also miss work resulting in income loss. Income loss may result to a financial crisis in families when these fortuitous events strike. Aside from the immediate expenses for funeral expenses and medical/hospital expenses, lifestyles will need to change as families will then struggle to look for ways to create income to pay bills, pay debts and mortgages, and send children to school. Insurance exists to address this very need, to replace the lost income and help families transition smoothly into their new reality.
Ideally, one's amount of life insurance coverage should be at least ten times his/her annual income. This is to make sure that in case things happen, one can be assured that the family they leave behind can maintain their current lifestyle for at least the next ten years.
Traditionally, Filipinos look at life insurance this way: somebody benefits from my misfortune. However, I would like to see my
kababayans shift to a mindset where they view life insurance this way:
If you love your family, you will want what is best for them. You want them to live a comfortable life and pursue their dreams no matter what happens. It is in your best interest to protect their lifestyle and protect their dreams.
What specific needs does life insurance address?
Life insurance can address the following needs:
- Protection from loss of income due to untimely death
- Protection from loss of income due to accidents
- Protection from loss of income due to disability
- Protection from loss of income due to sickness
- A savings plan that can give higher yield than the banks
- A plan to save for your kid's college education
- Setting up a retirement fund
- Investments for preservation of capital
- Investments for capital appreciation
Is there a life insurance policy that can address all these needs?
I'd be happy if I found one, but I haven't come across one. Each insurance plan is designed to address specific needs and I haven't come across one plan that addresses all the needs mentioned above. What we can do is set our priorities straight, identify which needs to be addressed first but ideally, we are looking at eventually addressing all the needs at some point in time.
What are the two main types of life insurance plans?
(1)Traditional or Ordinary Life Insurance plans and (2)Variable Unit Link(VUL) Insurance Plans. Traditional life insurance plans are typically income protection plans when fortuitous events strike. Most of its benefits are guaranteed, and some plans may earn cash dividends which are basis for surrender values.
VUL Plans carry the income protection benefit of traditional plans but mostly to a lesser extent. The distinct feature of VUL Plans is an investment feature wherein the plan holder gets to choose the type of fund that his money will be invested in. Most underlying investments are placed in either three(3) types of funds: Fixed Income Funds, Equity Funds, and Balanced Funds. Fixed Income Funds carry the least risk among these 3 fund types but also give the lowest yield. Equity Funds maximizes potential returns while risks become higher.
Understanding Life Insurance: Benefits, Values, Risks, etc.
Originally Posted by BatmanBeyond
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