Do You Really Need A Life Insurance?

On my first year of working, my mother will always tell me to get insurance. During that time, I really do not understand how important it is to have one. At first, I thought I am too young to get a policy.  Years passed by and I still do not feel the need to purchase one. But being older and wiser, I know I have to secure one.

(Image: squirrel.co.nz)

When do we really need to get a life insurance? 

Before we get into any investing, we are advised by the experts to purchase a policy. The life insurance will add up to our asset but will not make us any richer. Having a policy is for the use of the people who are dependent on our income. It is a protection on future spending in the event of the death. It may sound dreadful but this is the reality of life.  All of us will reach our end rope, and our family who will be left behind will bear the debts and expenses on our passing.

In the Filipino culture, death is not widely discussed but if we love our family, we would want them to be cared for, and not want them to suffer after we left this world.  

If your parents are partially or fully dependent on the money you bring in to the family or you have a child whose future is fully reliant on you, then it is necessary to purchase an insurance. However, if you are living alone and only responsible to take care of yourself, you can delay getting a life insurance but definitely, later in life, whether you are living for yourself or for someone else, you must have at least one to cover the expenses in case of emergency or death.

What insurance to get?

Insurance have many forms. There are insurance that combines investment and protection, while there are other kinds that purely protect you.

Choosing a type of insurance will depend on how much you are earning and how much you can commit to pay.

There are 2 main types of life insurance:

Term -which provides you protection temporarily

Permanent - which provides you protection for the rest of your life

See how you can benefit from each on the comparison table below.

Understanding the Different Types of Life Policies

What the policy offer	Term Life Insurance	Universal Life Insurance	Indexed Universal Life Insurance	Survivorship Universal Life Insurance	Variable Universal Life Insurance
Temporary Coverage
Permanent Coverage
Provides a Guaranteed Death Benefit
Focuses on Affordability
Can Provide Coverage for Your Lifetime
Covers Two Lives With One Policy
Has the Potential to Build Cash Value
Offers Growth Potential Based on Performance of Index
Offers Growth Potential Based on Market Performance
Features a Tax-advantaged Death Benefit
Includes the Ability to Access Money in Your Policy
Offers Riders to Customize Your Policy
	Term Life Insurance	Universal Life Insurance	Indexed Universal Life Insurance	Survivorship Universal Life Insurance	Variable Universal Life Insurance

(Image: Prudential Life)

How much coverage will you need?

Primary reason to get a life insurance is to give your loved ones protection financially upon your passing.  It is reasonable to see the amount of income you provide for your family and how long do you think they can recover from the loss of the income.  For example, if your annual income is P500,000, will this  amount be able to cover to fund your child's education, payment of your loans, debts, their daily expenses when you are gone? Will your family be able to find another source of income within a year?

Some people will allot 2-3 years worth of income to give an adequate amount and time for them to recover from the loss.

When determining what to buy, it is worth remembering that the younger you are, the more cost effective it will be.

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