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.

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BANKS: The Only Option For Savings?

Money is an object we as adults work hard for. It is a medium wherein we use to exchange for something that adds value to our life. Every people have different definition of what money is and what it is for – positive or negative or both. This allows us to have things that answer your basic needs and wants. The more money you have, the more you become comfortable mentally simply because you are assured that for the coming days your basic needs would be provided for. It really makes the world go round.

All our lives, rich or poor, educated or not, we work just to earn money. Poor people, as early as they can think, they are trained to make money in whatever way possible – begging, collecting and selling garbage, and sometimes committing crimes. For us educated people, we were trained for 16 years more or less from nursery to college also to make money. We specialize on a certain field which will turn out to be our career that would provide us high paying salaries or business earnings. At the end of our formal educating years, what do we do next? Yes, make money. Everyone does, except of course kids who don’t want to work because they have filthy rich parents.

Once we start earning money, we take care of our basic personal needs. Then when our salaries will eventually be bigger than our basic needs we now can afford things beyond our basic needs – shopping, travel, etc. But there will be a time, either right away or later, when you would realize that this wouldn’t go on forever. Thus, we start saving money for our future.

Before, saving money is very simple. Keep it in a safe place in your house which would make it very vulnerable or keep it in a bank. This traditional way of saving is still being used right now. Banks certainly bring a lot of convenience to us. Deposit in your account, and the bank would be the one to protect it. Need money? Withdraw using ATM or through the bank teller. This makes us love banks even more. But will your money ever grow with them? I don’t think so.

Savings account earns 1% minus tax. Time deposit earns you 3-5% minus tax depending on the amount of deposit. Our inflation rate sometimes reaches to 5%. TRANSLATION: Your money isn’t earning well in the bank or sometimes the value even depreciates. Not everybody understands this, but you should! Your hard earned money depreciates in value over time in the bank. What if 10 years or so of saving you still haven’t found an investment vehicle? Then your money just depreciated before your eyes.

Are there any other savings tools aside from banks? My answer could create different reactions: LIFE INSURANCE. How? Through investment linked products of Life Insurance. Yup Life Insurance today isn’t just about claiming a lump sum amount when somebody dies. You can use it as a savings tool that earns 6% or more.

This savings tool is a bargain because it gives you life insurance coverage for free. The moment you open an account, not only did you simply open an account, you also are covered immediately. How’s great is that for a savings account? And just like the bank, you can withdraw and deposit.

That right there is an alternative when it comes to savings. But I am not saying that you empty your bank account and move it to insurance companies. Your bank account should be for immediate cash need purposes and Life Insurance for long term savings purposes because it out grows inflation rate and earns way bigger than banks.

So my question to you is, do you just let your hard earned money depreciate like that in banks? Or do you let it grow for savings purposes until you have come up with an idea where to invest it? What’s your pick? - DE

P.S.

Do you have a better savings tool? Comment here or contact me! Should you want to know more about investment linked products of life insurance, you watch out for my coming blog about that it. It would be a simple explanation of what it is. But if you want to know about it in full details, you can contact me through email first. Cheers!

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Time Depositors Aren't Real Investors

Time deposits could be one of ways to earn money. All you have to do is to deposit your money in a bank for a specific span of time, with interest. However, those interests aren’t enough to make you big bucks. You will feel the growth of money if you deposit at least a million.

Simple Sample Earning from TD per annum

The illustration above is a sample earning from time deposit. 5% interest rate is a very good rate that you can rarely find, but if you do, it requires you to deposit very big amount of money. However 3% and below is what you will usually find in banks.

Let me give an example, imagine you’ve deposited Php 100,000 and the bank gave you 3% interest rate per year. You would earn a puny Php 3,000 minus income tax! How lame is that?

Time deposit would not be very significant unless of course you have tens, hundreds of millions of excess money to put aside. Time deposits doesn’t give you the privilege of being lazy! Saying “right now it’s the only option I can think of “ or “risks in time deposits are low” are very lame excuses. You’re either too dumb to see/know that there are other opportunities or you’re a chicken – scared of risks. You want very low risks for your money, you will definitely get small returns. Hate to break it to you pal! You’re not a real investor! You don’t even have the right to call yourself an investor if time deposit is the only thing you do.

Now, I am not saying that you shouldn’t place your money in time deposit. All I’m saying is that time deposits is a tool to give you money ONLY if you know how and when to use it. And time deposit are intended for excess (I mean really many) money you can set aside for a specified time.

The good thing though, you still have time to explore other ways to earn passive income. All you have to do is delete the poor mindset of yours and change it to a wealthy mindset. You’d surprised how many opportunities passes us by each day. -DE

To a wealthier mindset and brighter future ahead! Cheers!

“Only those who will risk going too far can possibly find out how far one can go.” – T.S. Elliot

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