Life Insurance Explained to Millennials by a Millennial

May 24, 2017 | Kristel Kaye Dequillo

Hey guys.

I have come across this post (actually a video) in Facebook about the “Five Things Millennials Aren’t Buying Into.” So I watched it and the first thing they listed was funny because really in today’s technology, no millennial will pay for cable when you can stream it for free. As expected, the rest of the list was total bull, but one thing that stood out was life insurance – and how millennials won’t buy it because “we don’t understand it.”

I disagree. We are changing that right now.

What is life insurance?

Life insurance is basically a protection of the insured (or the one who purchased the insurance) against financial loss due to life’s uncertainties – death, being the most common. In the event of the insured’s untimely demise, the proceeds are given by the insurer (or the insurance company) to the beneficiary or beneficiaries named in the insurance policy, therefore protecting them from the financial impact brought about by the insured’s death.

Gone are the days where insurance proceeds can only be realized when the insured dies. Today, life insurance can be tailored-fit to provide a comprehensive protection to the insured not only against untimely death, but also accidents, disability and sickness. Investment components have also been integrated with life insurance, so the insured is now able to enjoy the benefits while still living, usually in the form of dividends or interest.

How does it work?

There is currently a wide variety of life insurance available in the market choose from, but the most basic life insurance starts with the insured paying premiums, which is just a fancy term for the amount being paid either monthly, quarterly, semi-annually or annually over a specified number of years (usually 5, 10, 15 or 20 years). In return, you will be covered or insured by the insurance company, such as in the event of death, your named beneficiaries will receive the insurance proceeds including the death benefit and other benefits included in the life insurance you have purchased.

If you are curious about how insurance companies pay the claims of their clients when it involves a lot of money, perhaps this will be a discussion for another time.

Do I need it?

Yes!

We have been taught in school to save – but that’s it! Nobody really taught us the importance of investing and growing our money, of understanding how inflation affects our money’s value, of filing our taxes, of emergency funds and life insurance and basically how to manage our finances. And when somebody does try to explain these concepts to us, we are cynical because there have been so many cases of insurance companies going bankrupt and unable to pay the claims of their clients. There is just so much controversy around it and we just do not want to get involved anymore. This is where your millennial stalking expertise (or fine, research and due diligence) comes in handy – you make sure you are dealing with an established company, with credible and trustworthy financial advisors. You will be able to discern it anyways, if you’re talking to somebody who wants to just make a sale or somebody who genuinely wants to help.

Think of life insurance as a sort of cushion, the thing that softens the blow when things get dire. Think of it as being responsible, a big chunk in your process of “adulting” because really, if ever we get sick and would need to shell out one million pesos on the spot for treatment – good that some of us will be able to afford it – but most of us would not be able to. Do we need our parents to take care of this for us? Good if they have cash…but what if they don’t?

How about if you are the breadwinner of your family and you are taken out of the picture all of a sudden due to an accident? Will your family be able to afford the lifestyle you have given them? Or will they struggle because you are no longer there?

Why does your car and your phone have insurance…and yet you don’t?

These are hard questions – maybe even too much for some of us to think about. But we need to ask the hard questions for us to realize the gravity and reality of it all.

When shall I get it?

After you have established your emergency fund and while you’re still young! Your emergency fund is your safety net for, well, emergencies. Rule of thumb is to have 3-6 months’ worth of expenses in a savings account and make sure to replenish this if you touch it! Build this fund before you get into investing in any instrument.

Keep it mind that its better to get life insurance while you are still young because premiums are age-based. The older you get, the higher your premiums will be. Sure, you might think that you don’t need it now – but this is exactly why you should start! Don’t try getting life insurance when you already need it (like when you are older and have been diagnosed with an illness) because chances are, you will pay higher premiums or worse, you will no longer be able to qualify for being “too risky.”

How much?

Premiums can vary based on age, other additional benefits and health declarations. Generally, you can start with a premium of P1,500 to P2,000 per month. Insurance companies now allow you to tweak your benefits so it is tailor-fit for your needs and your budget.

Is it worth buying now?

Premiums are cheaper when you are younger, so if it costs you less now, its worth it. If buying now  means accepting and understanding the responsibility of taking care of your loved ones and yourself because no one else in the world will, then its worth it. If it means you will be forced to save now to have a comfortable lifestyle later, even if you have to forego spending on things you want – then it is worth it.

Best way to protect your loved ones even after you are long gone, and the best way to protect yourself from uncertainty is life insurance.

Know your options today. Talk to me and let us plan your future.

Kaye Dequillo
Insurance/Financial Adviser
Manulife Philippines
info@kayedequillo.com
0915 550 0111

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