Term Life Insurance vs. Whole Life Insurance
Live life to the fullest. Grab life by the horns. Just make sure your life is insured. Life insurance is the only vehicle that delivers a set amount of money at a specific point in the future.
While you won’t be around to collect the benefits of your life insurance, your dependents would definitely benefit from it. The money can help pay off mortgage, put your children through college, cover estate taxes, or just help your family make ends meet. If you’re pondering whether to buy an insurance product or not, it would be most beneficial if you consider the following:
1. You have dependent children
2. You support your parents
3. Your spouse depends on your income
On the other hand, if you’re single with no dependents and limited assets, you probably don’t need life insurance.
There are two basic types of insurance – Term Life Insurance and Whole Life Insurance. Each has its pros and cons.
Term Life Insurance lets you specify the amount of coverage you want for a given time – in 5, 10, 15, 20, 25 and 30-year periods. Finance experts say to buy guaranteed renewable full-term insurance. Your premiums won’t change, and your beneficiary receives the full value anytime during the term of the policy.
Term Life Insurance is the cheapest and most popular life insurance you can buy. I was even offered twice by Metrobank and HSBC through an automatic debit on my credit card. I got the cheapest offer. It was HSBC whose premium was only P310 per month.
While term life insurance may be the cheapest form of life insurance, its drawback is that it’s temporary. Once the policy expires, the money you spent on premiums is gone.
Whole Life insurance, on the other hand, has higher premiums because you’re buying an investment that offers lifelong coverage. As long as you pay your premiums, a percentage is set aside and invested. As your policy grows tax-deferred, you can make withdrawals or borrow against it. If you cancel the insurance policy, you can receive some or all of the cash value back.
There are many variations nowadays of these two main types of life insurance. There’s variable life insurance and universal life insurance. They act as a forced savings and help protect you assets.
If your insurance needs change, you may be able to convert your term policy to whole life policy, as long as you do it through your current insurance company. But be careful whose advice you take.
Experts say that insurance agents that sell insurance policies make a whole lot more money on whole life insurance than they do on the term life insurance, so the advice they give may be suspect.
My personal financial advice is that if you’re single with no dependents and you can manage your finances properly, insurance products may not be the best investment option to grow your money. But if you’re the type of person, even if you’re single, who doesn’t know how to manage his or her finances, then insurance products are good way of forced savings. The younger and the healthier you are, the cheaper your insurance premiums will be.
However, no matter if you’re single or married, as long as you have dependents, whether your parents, children, or spouse, then try to get a life insurance. It is definitely a good protection against life’s uncertainties.
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August 23rd, 2009 at 3:24 pm
ganda ng theme. Mas neat
Pero di bagay yung yellow background mo. Dapat palitan ng kulay. hehe
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August 23rd, 2009 at 4:33 pm
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August 23rd, 2009 at 4:48 pm
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August 23rd, 2009 at 6:00 pm
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August 23rd, 2009 at 6:57 pm
oi. salamat sa pagbisita dun sa blog ko ha. thanks talaga!
Monz Avenue
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August 23rd, 2009 at 7:48 pm
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August 23rd, 2009 at 9:54 pm
I once have an insurance policy, it is more of a Term Insurance policy. I just discontinued it because I can’t keep up with the premiums and it is more of an involuntary acquisition. It’s a long story ahehe.
@Jehz
Need mo na magpainsured hahaha malaki na worth mo e hahaha
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August 23rd, 2009 at 10:18 pm
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August 24th, 2009 at 12:07 am
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August 24th, 2009 at 1:15 am
It seems Whole life insurance is a better idea.
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August 24th, 2009 at 2:02 am
And now I think I’ll definitely get a new one, any tips about insurance companies who have a good policy and an outstanding records?
btw, I like your new theme - so clean and make my computer faster when opening this site…
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August 24th, 2009 at 2:14 am
I would recommend Manulife, Sun Life, AXA and Pru Life among others. I am not sure about Philam Life because of the AIG issue.
If you have dependents, definitely you should get an insurance policy and set a fixed savings to pay for the premiums.
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August 24th, 2009 at 3:59 am
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August 24th, 2009 at 8:27 am
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August 24th, 2009 at 11:32 am
since the topic is insurance..actually right now maraming nagaalok for insurance skin di ako makapagdecide where to choose from them
can you make another post comparing the different insurances in the philippines..mejo risky nga kasi maginsurance ngayon right because of what happened with the other small insurance companies.
ayan inisipan na kita ng next post..hehehe
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August 25th, 2009 at 4:18 pm
No life insurance company has closed down in Philippine history. There are a couple of controversial companies such as CAP, Pacific Plans, Legacy Plans, Permanent Plans, Prudentialife, Family First.. but none of these are life insurance companies. Those that went to trouble were all pre-need companies, and pre-need companies are just that, ordinary companies such as the convenience store, flower shop, etc., with no serious regulations or governing bodies looking after them.
The life insurance industry has more stringent regulations that govern it, under the watchful eyes of the Insurance Commission, an agency under the Department of Finance. Life insurance companies are re-insured by reinsurance companies such as the National Reinsurance Corporation of the Philippines (www.nrcp.com.ph), which makes all life insurance policies technically safe.
Perhaps you could remember a number of foreign life insurance companies such as John Hancock or ING Life which had Philippine operations in the 1980s or 1990s, but are nowhere now. Don’t worry. These companies did not close down. Nor did they go away with your money. As international companies, they just had a strategic decision of moving out of the Philippines, but all life insurance policies they issued were turned over to other players who acquired them. In this case, it is Manulife for John Hancock, and PruLife of UK for ING Life.
As for choosing between Term Life or Whole Life, I would prefer Whole Life as this comes with cash values and dividends. Coverage is until age 100, or virtually your “whole lifetime”. The cash values and dividends may also be “attractive enough” to withdraw, should the time come when you badly need the money in your retirement years.
As for those who chose Term Life Insurance, try ask your advisor if this could be converted into Whole Life, so that your benefits would last longer and you could also enjoy the cash values and dividends.
Younger professionals would tend to avail of Term Life, thinking that it is the same as pre-need, with affordable fixed payments and coverage for a fixed period of time. But in reality, with advanced medicine and science, our life expectancy is getting higher now (at age 75 or 80 or even higher, compared to the previous 60’s) and so you will more likely outlive your Term Life Insurance plan. As the blogpost mentioned above, you lose all your premium payments upon the expiry of your plan.
Variable or Traditional Life? I availed of both types of life insurance policies as I would want to have both fixed and variable “earnings” on top of my life insurance coverages. Variable life are the hottest life insurance products in the market because of their flexibility and earning potential. There are a lot of products under the Variable and Traditional Life, and I’m sure there is one that will suit your needs, whether or not you believe in life insurance, a.k.a., setting aside money for your future dependents.
If you are the adventurous type who invests in the stock market, mutual funds, UITFs, bonds, etc., you should safeguard your investments by putting in variable life instead. There are minimal insurance charges, but these fees are also prevalent in the other types of investments (in the form of brokers’ commission, doc. stamps, 20% withholding tax, asset management charge, 10% fee on dividends, etc.) As for variable life, the insurance charge is all worth it as the minimal fee guarantees you of a life insurance coverage, aside from the potential earnings from the variable life investment.
For example, investing P200,000 in a UITF may yield to either a +20, +10%, 0%, -10% or -20% income one year from now. You will be happy if it turns out positive, but lonely if it turns out negative.
In a single-pay variable life investment, you will be happy if your P200,000 investment turns out to have a yield of +10%, +20%, etc. But when it turns out negative, you should still feel neutral to positive. Even as your P200,000 principal potentially drops to P190,000 after some time, you would still have a full P250,000 guaranteed amount in the form of life insurance. (P250,000 will be given to the dependents if the insured dies, even if his principal is just P200,000 and its value dropped below P200,000. On the other hand, if the investment earns well and reaches P270,000, then the dependents will get P270,000 and not just P250,000)
If you have the extra money, you can never go wrong with a life insurance investment, for as long as you don’t get fooled by a fake agent/broker. All you have to do is ask and demand for products that will suit your need, and not allow the agent from force-fitting his products to you.
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August 26th, 2009 at 12:09 am
In my case, I plan to settle abroad. And so I need liquidity anytime soon when the opportunity arrives. Added to that, if I get a life insurance plan here, I just don’t know if I could get the benefits when I’m already abroad. I tried asking some insurance companies and they said that if that case happened, I would need to fly back here to get the benefits.
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September 5th, 2009 at 7:37 am
1st level - term insurance worth $300,000 dollars at P50/dollar translates to P15M. i pay $1,500 per year for the premium. In addition to this, I have P5M worth of life insurance from Sunlife.
2nd level - I have at least 4 investment vehicles that generates at least P18M worth of gross sale and at least P6M worth of net income plus my net salary in working abroad worth P5M a year.
3rd level - are real estate properties worth P30M, two of them a condo from Eton & Colinas are stil for financing.
4th level - treasury bills and stocks from blue chip companies worth P5M and liquid cash worth P8M.
Should I pass away at least I’ve made sure that my children will have the financial freedom that we all aim at and hopefully theyll be able to expand and grow the business that we have now.
My only problem is, my wife just might kill me for the money hehehehehe. Cheers! & more power!
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Tyrone Reply:
September 5th, 2009 at 8:42 am
By the way, I think you are already literally financially free. Why still work abroad? Or you just enjoy working?
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September 15th, 2009 at 12:47 pm
Thanks for the feedback. I can consider myself financially free but I think the real measure will be when I can afford to retire 2 years from now with a pension of at least $20,000 a month. Wouldn’t that be a feat?
Last year I went to California and it was my first time there. Was impressed with the huge highways, areas, etc. and that’s when I decided that I’ll retire there at the age of 45 (I’ve turned 41 last August) with at least a monthly pension from my investments/businesses worth $15K to 20K. I’m in the proces of forming a LLC corp. there (idol - Mikey Arroyo) and will acquire a 153 acres lot worth $60,000 (bargain price) and probably start a farm or a ranch.
At the moment, my net income/earnings is peg at $10K. When I make it at $20K, I’ll surely retire and migrate to the US.
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