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Aug 4, 2017

Five Common Misconceptions about Insurance in the Philippines

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Although life insurance is a crucial aspect of a healthy personal finance, only 2% of Filipinos have life insurance. This is mostly because of the insurance misconceptions that are rife in the Philippine society. The lack of awareness of the benefits and importance of insurance is why many have failed to take action. The following are some of the misconceptions that keep people from getting an insurance.

That you don’t need it

Yes, you need it, especially if you have people depending on you. One of the main purposes of life insurance is income continuation. This means that should you meet an untimely death, your dependents can continue having the same quality of life at least long enough for them to gain their footing and become financially independent themselves. You see it all too often on the news,  the family’s breadwinner figures in an unexpected tragedy and the loved ones are left reeling not only with the loss but because of the financial uncertainty they are left to deal with.

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That your HMO is enough

People often confuse their HMO coverage for life insurance. While both are great products, they serve different purposes. While some life insurance offerings include hospitalization, they generally do not cover checkups and annual physical examinations, which are the specialities of HMO. Life insurance, on the other hand, is very helpful in the event of an accident, permanent disability or critical illness. These things can be just as sudden as an untimely death, and the hospitalization and medicines they require can easily deplete whatever savings you may have, especially as you are likely to lose your job and be without the HMO insurance it provides.

While these things can be awfully scary, dealing with them head-on is crucial. It is an unavoidable fact: our time will come. And there is simply no telling if an unexpected tragedy will befall you. No one is completely immune to such things. The most you can do is to be prepared, not just for yourself but for the people you care about. 

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That life insurance is only for grim events

Beyond just fortuitous events, life insurance actually has other uses. It can fund your retirement, pay off tuition fees, and help you reach milestones. If, say, you retire at 65 and live 15 years more, you would need funds to live off of for the rest of your days. How would you do that if you no longer have your salary? As any financial expert will tell you, what you will receive through SSS is just not enough. Your food alone, if each meal costs Php100, would add up to Php1.6 million. How about the cost of maintenance medicines, utilities, and loans you may still be paying by this age? You will find insurance plans that provide maturity benefit that will let you withdraw the full cash value of your fund at a certain age. This will help you enjoy the same quality of life even when you no longer have an active income.

Life insurance is also great for funding your children’s education. You don’t have to be one of those people who have to downgrade their kids’ school or have them stop schooling altogether because you are going through tough times. You can avoid this by going beyond just covering the costs head on. You can put your money in a fund that will grow in time instead and keep up with the yearly tuition fee increase. You can do this by choosing plans that link insurance with investments, such as the Variable Unit Linked (VUL). This has become increasingly popular because of its ability to beat inflation.

Your life insurance can even help you reach some of your major life goals, like your dream of owning your own house, car or business. You will find plans that offer living benefits, allowing you to withdraw your funds so you can purchase or fund these things.

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That it is expensive

Life insurance is not as expensive as you’d expect. Term insurance is by far the most affordable. A 30-year-old can have a Php500,000 coverage after paying for only Php3,000 to Php4,000 each year. That amounts to only Php300 per month, or the equivalent of two cups of coffee from a coffee shop. A VUL can cost as low as Php1,200 to Php2,000 per month. With an investment component, you get the chance to earn just enough to recover all the premiums you paid. A group or corporate insurance costs even less with some offered at a premium of less than Php100 per per year for each member of a group. Life insurance really does not have to be expensive. Mind you, you can even find plans like the Palawan Pawnshop Insurance that only require a one-time payment of Php20. 

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That it can wait

The truth is that you should secure protection while you don’t need it just yet, and for several reasons. For one, as you move through different life stages, you will have to deal with different needs. You may be single in your 20s but would have to be married soon and have children whom you would have to provide for, then you will grow old and stop actively earning an income. Life is simply much easier when you have a sound financial foundation. Moreover, the rate of premiums increases as you age. This is because the risks associated with older people are higher, especially in terms of health. Also, people do tend to acquire illness as they grow older, which can cause insurance applications to be declined. Insurance providers do take the efforts to manage risks. Insurance companies are known to reject applications by people who are already in a critical medical condition.

Another great reason to start paying for a life insurance now is so you could leave your investment with more time to grow. You should use the power of compounding to your advantage. This allows the fund value of your VUL plans to increase over time. You also have to remember that deaths and accidents can be sudden. No one really knows when their time on earth will end. Plus, you have to be aware of the contestability period often included in policies. If an accident or death occurs within the period, the insurance company can deny the claim after duly investigation.

Learning about the prevalent Filipino insurance misconceptions is a great start at finally taking your steps toward a financially-sound foundation. The best time to work on your financial health is now.


Patricia Evans
Twitter: @patevans016
A mum blogger who loves travel and interior designing

Patricia Evans is a part time interior designer and a full-time mother. She has worked in Marketing before but she quit her job to pursue her true passion: fashion and interior design.


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