Investment Linked Insurance Products

This is the continuation of my previous blog BANKS: The Only Option For Savings?

Investment linked products are Life Insurance tied up with an investment. This means that your investments are secured with life insurance coverage. And this has become the preferred choice of Filipinos over traditional life insurance nowadays because of its flexibility and value for money.

Investment linked products of life insurance companies caters yuppies, matured and even old people. There are also options for your risk appetite – low risk, medium risk, and high risk. Should your risk appetite change from time to time, it wouldn’t be a problem as you can switch funds or change death benefits. Your financial advisor should take care of the amount of the account and through assessment of your financial situation he should be able to recommend a plan perfect for you.

What is its feature?

• Flexible payment mode. Option of paying annually, semi-annually, and quarterly.
• Flexible payment years. You decide. Whether to pay regularly, only a few years, skip payments (premium holidays), or pay once.
• Withdrawal. Partial or whole. Just like the bank, you can withdraw.
• Deposit. If you want to deposit, you can do so. In this case it is called a top up.
• Very low cost of Life Insurance Coverage. It just takes 3 years to pay the coverage. On the 1^st year 100% of the premium goes to coverage, the 2^nd and 3^rd year only 50% goes to coverage and the other half goes to the investment. The succeeding years of payment (if any) will go to investment.
• Premium Holiday. You may opt not to pay as long as the insurance coverage will be covered by the fund.
• Death Benefit Option. You can switch anytime from level death benefit to increasing death benefit depending or back, depending on how important coverage would be in a certain situation of your life.
• Option of Funds. Balanced Fund which consists of equities around 30%, money market instruments around 10% and bonds around 60%. Equity Fund has around 10% money market instruments and the rest are equities. Bond Fund has around 5% money market instruments and the rest are bonds.
• Switching Funds. You are entitled to switch funds if you wish to do so. It’s just as simple as moving from Equity Fund to Balanced Fund.

So this is an investment? Yes an investment for your future. If you are trying to save up for the future this would probably be your best option.

This type of investment is a steal because while you are saving for the future, you are also covered. That surely beats savings in banks. When something happens to you, your family will get an amount plus the investments. In banks when something happens to you, it would be very hard to claim the account.

Think about it, from day one of your premium, you 20, 30, 40 thousand is already worth 400 thousand. Saving with this investment vehicle is the smartest thing to do right now. No matter how old you are, saving is always better to do NOW than later. And never forget that there is no such thing as instant growth of money, so before you get one, understand that this is a long term savings plan. This is an alternative to savings banks and you would be sure that your savings are protected with coverage. - DE

2nd photo: Taken from iStockPhoto, thus the watermark.

Read more

Paper for Now, Food for Later

Life Insurance in the Philippines always has had a bad image. Its image is more of an expense, rather than a benefit. When annual bill comes, the policy owner frowns instead of smile, would rather feel like buying gadgets than to pay insurance. Why can’t people see the importance of Life insurance?

When Life Insurance policy owner reaches 5 years or more of paying, they would suddenly feel like it has been a liability to them because they haven’t received anything yet. They will forget the reason why they bought it in the first place – to protect their family or prepare for a major expense to come or plan for retirement.

There are reasons why Life Insurance has a bad image here in the Philippines. First of all, most Filipinos have very short patience when it comes to money. They want big returns in just a short amount of time with very low or no risk at all. So after 5 years or so of putting their money in insurance, they feel that it’s a bad investment because they aren’t receiving anything yet.

Another reason is that people think that pre-need companies like CAP are the same with Life insurance companies like AXA Philippines, SunLife Financials, Manulife, etc. Yes they both have products that provide solution for future needs, but they belong to different governing bodies - Insurance Commission for Life Insurance and Securities and Exchange Commission for Pre-Need. The recent crash of CAP frightened investors to place their money in Life insurance companies.

Lastly, insurance agents usually don’t explain everything about the policy they are selling to their clients or sometimes misrepresenting the company by promising things that the company doesn’t provide. Add to that, after making a sale, these agents disappear immediately. Agents play a major role in this business because after-sales-service is a must. Unfortunately, only a few genuine hearted agents do this. They are responsible of reminding their clients the importance of life insurance to them and to their family and to remind them to pay so as not to experience lapse (policy would not be in-force once one payment is missed).

Filipinos should understand the importance of a Life Insurance Policy not only to them but also to their family. It may be tiring to pay these plans for years but if you understood fully the importance of it, it wouldn’t be much of a load on your shoulders. If something happens to you, your family would be guaranteed to receive the amount of money that your salary would have brought, should be enough of a reason for you to love insurance.

If you lived too long, you’ll feel like paying insurance is too heavy of a load on your back. Well you should be glad that you’re not claiming it yet because you’re still alive. Be thankful for that. And, this would be fund that would let you live the lifestyle you have when you grow old.

If you feel that you don’t need Life Insurance, just think about your family. If something happens to you, would you want them to die with you? Do you love yourself and your money more that you love your family? Don’t be selfish. Start thinking and plan a better future for you and for them. Don’t hide from financial advisors; they might the answers to problems you haven’t even thought of. For now it’s just a paper, but someday it would be food for your family.- DE

Read more