Torn Between Variable Unit Linked (VUL) Life Insurance and Investment in the Philippine Stock Market, Read This Article | EfPrime Financials
What is a VUL Life Insurance?
Coverages and CostHow to Earn from VUL?TaxesIs the investment withdrawable?
What is a Stock Market Investment?
How does it Work?How to Earn?StrategiesTaxes
Main Comparison
Financial ReturnsCost of Life RisksValue for MoneyHelp When Needed
Summary of Pros and ConsConclusion Product and Service Recommendations
What is the best VUL Life Insurance?How can you start stock investing?
What is a VUL Life Insurance?
VUL Life insurance is a life insurance product that insures the life of a person while at the same time earning an income out of it. The basic purpose of life insurance is to help the bereaved family maintain their lifestyle even after the untimely death of the family provider. In other words, your kids will still become a Doctor or a Lawyer despite the absence of the income that you provide. I know that we Filipinos love our families too much, the best gift that you can give to them, your wife and your kids is a secured future by way of life insurance.
In effect, you are maximizing the use of your hard-earned income because while you are protecting your family's future, you are invested. This policy is ideal for persons who have responsibilities in life example a person who has a child/children or anyone who has a dependent.
Let me emphasize the importance of having life insurance. In modern Personal Financial planning, there is something that we call an investment hierarchy which states that before investing in risky investments and even before saving for an emergency fund, you should first invest in your family's protection thru life insurance and medical insurances. After you have invested in your life insurance, that is the perfect time to start saving for an emergency fund and start investing in time deposit, Pag ibig MP 2, Stock market, Forex, cryptocurrency, and commodities.
Coverages and Cost
- Ensure your life;
- Ensure yourself against accidents;
- Ensure yourself against critical illnesses;
- Ensure yourself against the cost of hospitalization; and
- Ensure yourself against the absence of money at your retirement.
How to Earn from VUL?
Taxes The proceeds of life insurance are exempted from taxes under the National Internal Revenue Code of the Philippines.
Is the investment withdrawable?
What is a Stock Market Investment?
How does it work?
Investment in the stock market is a highly volatile investment. People made riches in this investment platforms while other people wasted money just to beat the market. Knowledge about technical analysis, fundamental analysis, and understanding of the company that you invest your money into are critical in stock market investments. Read my article here about the background of the Philippine Stock Market.
There is only less than one (1) percent of Filipinos who invest in the stock market. It does not mean that the investment platform is not working, but it just happens that Filipinos are not aware as to this platform because this investments are not thought in schools.
How to Earn Investment?
Investing in the stock market means you become a part-owner of a publicly listed corporation. Hence, after buying a single stock of Jollibee you technically become an owner of the business.
There are three ways to earn income from investing in the stock market:
Buy Low, Sell High;
Dividends from the corporation; and
Capital appreciation.
Strategies
One strategy that you can employ in your trading is the so-called ignorecubes doctrine. Knowledge about technical analysis is also needed to make money in the stock market. You should take the time to study this because you can make money from it.
Taxes
Main Comparison
Financial Returns
- Investment in the Stock Market has higher return as compared to VUL Life Insurance;
- VUL life insurance is professionally managed by a Portfolio Manager while a Stock Market investment can be managed by any person regardless of educational attainment. Needless to state, the return of investment for a Stock Market investment might differ on a per investor basis depending upon the intelligence of the investor and several market factors, for example, Covid-19 pandemic;
- Stock Market investment may not be continuously funded because there will be times that investor loses commitment since the market underperforms to deliver profits. On the other hand, investment in the VUL insurance, the investor will continuously be funded since the Financial Advisor will always conduct a follow up with the payment. Read the effect of non-payment of life insurance.
- Withdraw Stock market investment amounting to P390,411.91; or
- Get coverage of life insurance amounting to P760,000.00 (see below) while enjoying the investment and other coverages
Life insurance can make you money at instant even if you can't physically produce the same that money at your present condition.
Cost of Life Risks
All the above cost of life risks which include untimely death, kid's education, accidents, critial illnesses and hospitalization are covered by a VUL life insurance on top of your growing withdrawable investments.
Value for Money
Help When Needed
Summary of Pros and Cons
VUL Insurance Pros:
Protection from life's risk ie. untimely death, accidents, critical illness, cost of hospitalization and retiring without money. It is a six (6) in one investment platform.
The only investment that you do in behalf of your family
Investment is exposed to lesser risk since investment enjoys diversification
You are constantly investing money even if the market is downProfessionally managed funds
You are guided by Financial Advisor
You can choose different payment terms 5,10, 15, 20 years to pay. The longer the payment period, the cheaper is the cost of premium.
Specific for Philam Life Insurance: VUL Insurance provides incentive, cash rewards and discounts from partner companies amounting to P200.00/week or P10,400.00/ year. It encourages you to do physical exercise. Hence, it will make you live longer, healthier and better lives.
Can make Top-up to take advantage of low market prices and buy more units
VUL Insurance Cons:
Lower level of accumulated investment compared to stock market investment
Clients see it as burden than something as beneficial
High cost of investment
Stock Market Pros:
You manage your own investment platform
You can start at any time
High chance of making riches
You can invest in any Philippine local public corporation
You can also invest to global stocks thru online application. Use etoro application, I trade US stocks using this platform. It has minimal fees.
Stock market Cons:
Not professionally managed.
High risks of incurring losses due to market volatility
Rate of return is dependent upon investor's intelligence when it comes to online trading
High chance of discontinuity due to loses in earnings i.e. paper loses
High transaction cost i.e. taxes and brokerage fees
CONCLUSION
It is apparent from this article that both VUL insurance and Stock market investments serve different niches. Buy a VUL if you want to have an investment for your family while invest in the stock market if you already have VUL investment as baseline protection in times of uncertainty.
Product and Service Recommendations
What is the best VUL Life Insurance?
How can you start stock investing?
Book my services as Financial Advisor.
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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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