Factors to consider when buying insurance
BUYING life and health insurance can be daunting and overwhelming. A lot of times we are not sure what to look for or what questions to ask, so we end up not buying at all. So here is a quick guide on what one should consider when shopping for insurance.
Every person values insurance differently, depending on whatever stage of life he or she is on. For someone with no dependents, he or she would need insurance for income protection in case of critical illness or accidental and permanent disability. Couples with kids would most likely value insurance more, because they want to make sure that their family’s future is financially protected, so on top of critical illness and accident coverage, they would need more life coverage to protect their children’s education. Understanding the deeper “why” when buying insurance gives us the sense of purpose that would allow you to continue keeping your policy in force.
The amount of insurance coverage you need would depend on your lifestyle and your purpose. Protecting your income, for example, would depend on how many years you would want your family to be financially supported and the type of lifestyle you would want them to have. The most basic computation for income protection coverage in case of death is annual income X number of years of support needed. The cost of becoming critically ill can range from P1 million to P5 million. While ensuring that your kids’ education is financially supported, you may need another P2 million to P4 million. Practically speaking, it is difficult to get coverage for all these in one purchase, but knowing how much you need gives you a goal.
There are different types of insurance products that can help you based on your needs and budget. If you have budget constraints and would want to be covered for a significant amount, a term insurance may be the best option. If you are not yet savvy in investing, you may find that a variable unit- linked plan would be better for your needs. Critical illness and health plans are considered for protection against medical emergencies. Insurance companies usually have products targeted for a specific need, so for starters, you can pick from those.
For life or health insurance products, there are supplemental benefits that you can add for better protection. These are called “riders.” You can add riders, like a waiver of premium, to ensure continuous life coverage, even if you suffer from critical illness or permanent disability. For some products, you can also add term insurance to further boost your coverage for a certain number of years, or a daily hospital income benefit for your critical illness or accident insurance.
For some people, the company they get insurance from is a big factor when buying insurance. Pick companies that are among the top, based on financial health metrics ( net income, net worth). Whatever reputable insurance company you choose, the financial advisor representing the company is a major factor in buying insurance. An insurance is a lifelong contract between the insurance company and the insured, so having a financial advisor you can trust is very important in the buying process. Your advisor will be the most convenient way for you to inquire about your policies.
Jeremy Jessley Tan is a registered financial planner of RFP Philippines. For inquiries, email info@rfp.ph or text