A Beginner’s Guide on Life Insurance Investment in the Philippines
Everybody is talking about investments, savings, businesses, financial goals and most would say that they want to become a millionaire and buy beautiful houses and performance-enhanced cars. With all those dreams, where should one start their journey and be successful?
Understand What You Need, Then Prioritize
Before anything else, kindly clear your mind then ask yourself what are your personal goals and ultimate dreams are. Assess each one by understanding what you have in your life right now then do a pair ranking. This helps you to focus on what’s really more important to you.
Have an inventory of what you have
You could be too busy that today you perhaps forgot what investments you’ve made already in your life. For this exercise, let’s make an inventory of all assets and liabilities that you have. Please be sure that you write it down on your notebook or on an excel file so you’ll always be reminded.
These inventory should include the following:
- Cash In Bank (All bank accounts)
- Payroll Accounts
- Time Deposit
- Direct Save Up
- Dollar Account
- Mutual Funds
- Businesses (Franchise, Proprietorship, etc)
- Insurance Policies
- Life Insurance
- Health Insurance
- Accident Insurance
- Real Estate properties (indicate a market value)
- Credit Card Debts
- Bank Loans
- SSS Loans
- Pag-Ibig Loans
As you do this, you’ll find yourself creating your own personal Balance Sheet. Please be honest in yourself when you do this. These information will assist you to understand where you stand financially.
Analyze and Understand Your Cash Flows
From the dictionary, Cash Flow is the total amount of money being transferred into and out of a business, especially as affecting liquidity. For this case, Cash Flow for you is your income and your expenses.
For this exercise, you need to list all your income sources, as in everything. This way you may have a precise understanding of how much money is coming in.
Next is to classify your expenses – Fixed expenses (PLDT DSL Bills, TV Cable Bills, Apartment Rent and etc) and Variable expenses (you have control over this e.g. Transportation Allowance, Food Allotment, Shopping and etc). By doing this, it will allow you to understand how much money you can adjust and bring into savings.
If you’re happy with your current cash flows, that’s pretty awesome! If wish to minimize further your variables expenses, you have to be wiser and smarter when spending so you can save more. At this stage, you should already know how much you can set aside.
List Down Your Financial Goals
Making your own financial goals sounds scary and pretty confusing especially if you’ve never done this before.
To begin, it’s great to classify your personal financial goals – either short term, medium term, or long-term, and find balance in all of it. You may use the following as a guide:
- if the goal is targeted in 5 years or below, classify them as short term
- if the goal is targeted in 6 to 10 years, classify them as medium term
- for goals that are targeted in more than 10 years, classify them as long term
In this goal setting process, always save something for your retirement. If you have children, best that you think of an education fund for them.
How Much Life Insurance Coverage Would You Need?
For those who are experienced, they already know how much coverage they want for their insurance investment as they have gone through numerous exercise of checking their cash flows.
For beginners, the basic computation for this is getting your annual expenses and multiplying it by 10. The value that comes up is your ideal life insurance coverage which you should be trying to meet.
In case you have existing debts, just add that, and subtract any existing life insurance coverage you have.
Select Your Preferred Life Insurance Company in the Philippines
Now that you are done identifying where you are financially and the resources that you have to plan for the future, it’s time to check out the life insurance companies that you may want to transact with.
I’d suggest that you check out the website of Insurance Commission of the Philippines (I’m proud to say that my Mom used to be the Insurance Commissioner during President Gloria Arroyo’s term) to get a list of legitimate Life Insurance Companies in the Philippines.
For easier and more reliable reference, you can never go wrong with any of these companies:
- Pru Life UK – Contact a Pru Life UK financial advisor
- Philam Life
- Axa Life
- Sun Life Financial
- Insular Life
Good luck to your first investment! Let me know in the comment box below if you have questions or concerns.