A Guide to Types of Insurance You’ll Need in the Future
Insurance, savings, and investment – these are terms that are slowly disappearing from the Filipinos’ financial vocabulary.
According to the 2014 Consumer Finance Survey conducted by the BSP, only one in four Filipinos has a retirement or an insurance plan. Additionally, the study revealed that only 4 out of 10 Filipinos have savings, with only 32% of the surveyed population depositing their savings in banks.
The figures above are alarming, but not entirely unexpected. In today’s consumer-driven society, planning your finances is becoming increasingly challenging. But with discipline and strategic planning, it’s not impossible.
Achieving financial security is all about knowing where to put your hard-earned money. This means cutting down on unnecessary costs and investing every extra cent you will save.
When getting a loan, for instance, choose an online pawnshop offering the least interest. The money that you will save from the additional cost could then be rechanneled to investments.
Investing in Insurance
An insurance is one investment that you can make at an early age. Not only does an insurance provide financial protection against many of life’s unforeseen circumstances, but can also help you create a guaranteed savings fund. Additionally, it helps you budget and develops good money habits.
To kick start your journey towards financial security, here are the different types of insurance that you need to start saving up for:
- Life Insurance
The primary purpose of life insurance is to provide a financial cushion for those you will leave behind. If you are the breadwinner of your family, consider life insurance as an essential.
There are three major types of life insurance namely term, whole life, and endowment. The function of all three is to create a principal sum or estate. This is the total amount that your dependents will receive in the event of an accidental or premature death.
When choosing a life insurance, consider your dependents’ living expenses on top of your funeral costs. Most financial experts suggest choosing an insurance policy that will cover ten times your annual income. This sum is aimed to cover not only your family’s daily expenses but also long-term expenses such as tuition and mortgages.
Aside from ensuring your family’s financial security after death, a life insurance is also a profitable investment. The amount you accumulate as you pay your premium is guaranteed savings that you can utilize as emergency funds. This could also be a source of retirement income.
While you’re still young and healthy, a life insurance policy should be on top of your priorities. At a young age, policies provide higher coverage at relatively lower costs.
- Health and Medical Insurance
With the increasing cost of medical care, a serious illness can quickly deplete your savings. A trip to the emergency alone comes with a hefty price tag. The cost of hospitalization, surgery, and maintenance medicine is even more expensive. Protect your finances from these circumstances by investing in a health and medical insurance.
A health and medical insurance offers financial assistance during medical emergencies. Some plans also cover the costs of different medical and dental services such as checkups, tests, and consultations. Primarily, the coverage of your insurance will depend on the plan that you purchased.
When choosing a health and medical insurance, work out a budget and decide on the amount of coverage you will be needing. If you are unwilling to shell out for a premium insurance plan, getting a policy with minimal coverage is better than not having one at all.
Remember, an unexpected medical emergency might be a great detriment to your finances, so any financial preparation you can do will surely go a long way.
- Home Insurance
In the Philippines, natural calamities and disasters are regular occurrences. The country experiences about 20 typhoons annually, and its location in the Pacific Ring of Fire makes it vulnerable to volcanic eruptions and earthquakes. While there is no accurate way to predict when and where these events will occur, you can still plan and prepare for their damaging effects.
A home insurance is one way to safeguard your properties from natural disasters and other emergencies. Again, the coverage of the insurance varies according to the plan you purchased. Some policies include coverage on fire, calamities, robbery, and water damage, to name a few. Others even include coverage on falling aircraft and vehicular impact.
There are several insurance companies providing home insurance in the Philippines such as Prudential Guarantee and MAPFRE Insular. You can also avail of a home insurance plan from banks such as BPI and BDO.
Before purchasing a home insurance plan, ensure that you properly identify the property you want to insure. Note that home insurances may differ from one type of property to another.
- Car Insurance
The Land Transportation Office (LTO) requires all Filipino drivers to purchase a basic third-party insurance that covers injuries to and caused by a driver during an accident. The coverage of this policy is minimal, so if you wish to extend your car insurance coverage, purchasing additional plans is highly advised.
There are various types of car insurance available to drivers aside from the Compulsory Third-Party Liability (CTPL) Insurance required by LTO. Various plans have different coverages with the Comprehensive Car Insurance as the most extensive. There are also plans that cover damages to property caused by accidents, fire, and robbery.
Choosing the best car insurance largely depends on your needs. If you live in a flood-prone area, for instance, it is best to get a car insurance that will cover damages caused by natural calamities. Consider your driving habits as well, and the type of car you own.
- Long-term Disability Insurance
A chronic illness or a disability can impede your ability to earn a steady income. In other cases, it can even strip away your capacity to work. This is where a long-term disability insurance comes into the picture.
When you become unable to work because of an injury or illness, a long-term disability insurance can pay a portion of your salary. Depending on your policy, your insurance can pay 50 to 60 percent of your monthly income.
Companies typically include this type of insurance in their benefits package. However, check if your company offers a short-term disability insurance or a long-term program, as the benefits of these two differ.
In a life filled with uncertainties, it pays to be financially prepared. Insurance, contrary to popular belief, is not a luxury or an extravagance. With life’s unpredictable nature, it is of utmost necessity.