Apart from investing in stocks, another financial topic that most Pinoys—again, those who are in the low income to low-low middle income categories—consider only for the rich is insurance. In fact, majority only encounters insurance in TV shows, including police procedurals. For example, a rich person was killed. The detectives investigate. It turned out the spouse was involved because they want the insurance money. Or sometimes, it turned out that the person insured made it look like an accident for him to die, in order for his family to get the insurance. Or something like that.
The short of it all is that, well, we usually thought insurance was only for the rich.
The short video below explains it more:
According to Dr. Sanjay Tolani, there are four reasons why you need to buy an insurance:
- In case you pass away, an insurance protects your family—especially if you are the sole breadwinner.
- In case you fall sick, an insurance will protect your income.
- If you are already old and can no longer work, the insurance money can be your source of income.
- When your kids go to higher education, you can use insurance to fund that.
The misconception that you need to “die” in order to be able to take advantage of the insurance money is no longer. Because of the changes in the insurance service, especially with investment-linked products, YOU—the person insured—can also enjoy the insurance money, not just your family. With insurance, you lessen the financial risk that you have to endure after a life-changing event.
Imagine buying an insurance for your newly purchased car. You are passing on the risk of paying huge repair costs to the insurance company in case you crashed your car.
The same thing with life insurance. For a fee (insurance fee), you are passing on the risk of not being able to get your regular income when something untoward happened to you along the way (for example, disability).
Dr. Tolani said that everything in life is not based about the job you are doing, or the amount of assets that you have, but your income. Everything in your life is based around income—food, shelter, clothes, lifestyle, education for your kids, etc. What will happen if your income gets destroyed (with you dying, or becoming disabled)? That is what you have to buy an insurance for.
You have to protect that one variable in your life that affects everything in your life. That’s what insurance is for.
In my next post, I’ll write about just how many insurance policies are enough for you. Stay tuned!