Importance of having Life Insurance with Updated Premium Payments - EfPrime Financials

Five months into our new normal, many people lost jobs and sources of income. If you still have a job today and your income is not reduced, then you are lucky. More than the financial losses and the disruption of our routines, most people who suffered from this pandemic are those who lost their lives. 

In today's blog, let me discuss the importance of having an updated premium payment with your respective Life Insurance policies. Before we discuss its importance, let us define first what is Life Insurance. 

Life insurance is a financial product that secures the life of the person insured. If the insured dies, then his/her beneficiary gets a tax free proceeds. In short, life insurance is a tool to help your loved ones to achieve their dreams and aspirations even if you are not physically present in this world. 

Needless to say, life insurance is the only investment that you invest in that is devoted to your family. Here is the importance of having an updated Life Insurance:

• Entitlement to the benefits of life insurance; 
• Peace of Mind; 
• Possibility of Earning Income; and  
• Develop Self-Discipline. 

Entitlement to the Benefits of the Life Insurance 

Being updated with your Life Insurance means that you are entitled to the benefits of your Life Insurance. There are different inclusions of your life insurance depending on what you purchased. Here are the usual inclusions of life insurance: 

a. Life insurance - in case of death, beneficiaries are entitled to your life insurance coverage. The proceeds of which are tax-free. Hence, the family that you will leave behind will survive and will not suffer the consequences of your untimely demise;

 

b. Accident coverage - in case of accidents, you can claim from your life insurance, if you purchased the same. In case the accident is also the cause of death, then beneficiaries can also claim Accident Coverage plus the amount of Life Insurance coverage. 

 

c. Critical Illness Coverage - in case you suffer illnesses covered by your Life Insurance, then you are entitled to an amount you can use to help in curing your illness. 

 

d. Hospitalization Coverage - you will be paid a minimum sum of money for every day of being hospitalized. 

The picture below reflects the hierarchy of investment. As you can see, Life Insurance is at the base of the Eiffel Tower because it is a basic financial product that families should have. However, in the Philippines, less than 2% have life insurance. See our video lecture regarding the Financial Literacy of Filipinos.

  

Photo Credits: Canva.com

As you can see, Life Insurance is even more important than an emergency fund. The reason behind is that, if something happens to you such as accidents, critical illness, or hospitalization, the amount of emergency fund will not be sufficient to cover the expenses of your needs. 

In case you already have Life Insurance and Emergency Fund, then you can invest in income-generating investments such as cryptocurrency, business ventures, real estate, mutual funds, and the stock market because these investments are risky vehicles. 

***Emergency Fund is a fund allocated for emergencies. It is composed of 3 to 6 months of salary. 

 

Peace of Mind 

Driving a car without car insurance gives you an uneasy feeling as if something will happen anytime soon as you are driving. However, when you are driving with updated car insurance, you are driving very happy and comfortable. 

The best thing that Life Insurance can give us is peace of mind. It provides a feeling of security that whatever comes our way, we know that we can overcome and most of all, that the people that we leave behind, will survive and achieve their purpose in life. 

Possibility of Earning Income

There are different kinds of Life Insurance in the Philippines. In this blog, let me discuss two (2) types: 

• Term Insurance - this insurance is a financial product in which when nothing happens to the insured, the payments he/she paid are considered an expense. Of course, if something happens to the insured that is covered in his/her policy, then, he/she is entitled to the insurance coverage. The good thing about this insurance is that it is cheaper than VUL Life Insurance. Further, you can cash in your policy by getting the cash surrender value of the life insurance policy.  
• Variable Unit-Linked (VUL) Insurance - this insurance is a financial product in which it has both investment and insurance in a single financial product. I endorse this insurance as something that maximizes the income of the working class. 

Develop Self-Discipline 

Starting an investment requires self-discipline. Some investors fail with their investment strategy because they lack self-discipline in continuing with their investment whether it be an investment in the stock market, mutual funds, bonds, or retail treasury bonds. 

You should have consistency in always allocating a portion of your income for investments. The rule of thumb is that you should invest at least 10-20% of your income. 

Effect of Non-Payment of Premium Payments

The effects of non-payment of premium payments of your Life Insurance are as follows: 

• Lapsing of your Life Insurance Policy; 
• Waste of Money; and 
• Lost the opportunity to Earn

When you start life insurance as an investment, make sure that you try your best to finish the same because it is really helpful to your personal economy and to your family as well. Owning Life Insurance is the first stage of financial independence. 

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Disclaimer

The Author is advising readers to consult with your respective Financial Advisors before venturing in any investments. Investing your money is dependent to your goals and your risk tolerance. You should know the risks and rewards of investing before you actually do the same. The illustrations above are for educational purposes only and any risks or losses that you may incur are imputable to your respective decisions.

The author does not in any way provide a guaranty as to the effectiveness and quality of the products and services that are featured in this blog.  The products and services were advertised based on personal experience and product and service reviews that the product/service received. 

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