I strongly urge you to get one.
I’m a late bloomer when it comes to life insurance. But I am happy to say that I’ve finally gotten one this year. Being the practical me, there is this certain sigh of relief that I can leave my family with some amount should I be gone for good. Morbid? Nope, just realistic. As they say, we can’t avoid taxes and death so might as well prepare for them. We will all die so might as well die with some money left.
Invest in life insurance as soon and as young as you can.
Basics of personal finance will tell you that before you invest in more risky instruments such as stocks or start a business, you should have at least 6x monthly income in liquid cash (in case you lose your job and income you have 6 months to find replacement and start earning again). And you should have life insurance. Many financially savvy moms will also tell you the same. After all mothers know best right?
In my case I tried business, stocks and mutual funds before insurance. Not the ideal route yes. Gratefully now, I have some extra for life insurance. I urge you to get one while you’re still young. Less sickness and health risks so far, more time before retirement and before you get sickly due to age so more time to save for your insurance. This means lower premium for you, and more time for the investment portion (if any) to grow and compound.
Types of Life Insurance
Some life insurance are plain vanilla or traditional. You pay premiums, you die, your beneficiaries will get a fixed amount. Some products have riders or add-ons such as accidental death benefit, hospitalization, permanent disability benefit, etc.
More popular now are those with investment component, or variable life insurance (VUL). You pay premiums, part goes to life insurance (minimum guaranteed) and any riders, while part goes to investments you can withdraw and enjoy later on. These are invested by the insurance company on mutual funds, equities and bonds, or give out regular dividends after x years etc. Of course this portion carries some risk and no amount is guaranteed, hence there is a variable portion on top of the death benefit. But if you have a longer investment horizon since you’re younger, then this risk is spread out and minimized.
An example is investing PHP30k annually for the next 10 years as insurance premium (actual premium depends on the insurance provider and factors in your age, health, risks in life, etc). Total of PHP300k investment (factor in time value of money if you wish). You get PHP1M life insurance plus portion goes to investment (say 60% or PHP180k). A regular investment for the next 10 years is bound to do well, what more if you have more years than that before you withdraw it.
But of course, you don’t get to enjoy the PHP1M. Your beneficiaries will get it when you die. Unless of course you reach a ripe age of 90s, then they’ll give it to you for refusing to die (seriously). But then again, let’s face it.
It’s prudent to get insured especially when other people depend on you. Don’t want to leave them empty handed.
Photo: “Rain” by Rich Anderson
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