When should I get Insurance?
By Ameena Rey-Franc
Adapting to the new normal can take some time. But with the right mindset and knowing how to stay on top of your finances, you can gain the much-needed confidence to face any financial hardships that may come your way. And what better way to boost your financial confidence than by getting the answers to your personal finance questions.
Recently, we received this question about insurance which seemed timely during this time:
“I have substantial savings (x2 of my Annual Income). Do I still need insurance?”
Why Get Insurance?
During my early 20s, I never really bothered getting life insurance since I was single with no dependents. I was pretty confident that my parents could fend for themselves in case of my untimely demise.
But ever since I got married and had my own family, my views about insurance made a complete 180-degree change.
“What if I get severely ill? What if my husband and I get into an accident? Who is going to provide the financial needs for my son?”
Yes, these may sound morbid but I told myself that it wasn’t enough to just sit pretty and hope for the best to come. I had to take action in securing my son’s future before it was too late...and I had to do it fast!
You see, we don't always know what's going to happen or where we're going. Whether it’s the excitement from our travels or living our day to day lives, it pays to feel “panatag” by getting insured, especially when you know that someone else’s life and financial needs depend on you.
What is life insurance?
Life Insurance is a “death benefit” which your family will receive when you pass away. Its primary purpose is to replace the future income of a breadwinner.
Now let’s answer the reader’s question who has a substantial savings amounting to twice his/her annual income.
There are two main scenarios where you might NOT need life insurance:
You really don’t have plans to have any dependents. And “dependents” aren’t limited to just kids. If you know that your aging parents might end up living with you in the future, you can and should get life insurance and count them as dependents. If you happen to be the higher income-earning spouse, your partner may also be a dependent. Even if you are single now but you plan on starting a family two years later, it would be a smart move to get life insurance now. It is very important to think about the financial security of those who depend on you, even if you're no longer around.
If you have enough savings and investments to self-insure. That means you have saved or invested enough for your family to be fine even if your income stopped right away. But don't underestimate that number, alright?
Imagine you and your spouse will be living into your 90s. Well, even if one of you is no longer around or even if you have no plans in getting married, the cost of healthcare and a comfortable retirement that could last one person to live 30 years or more are MAJOR EXPENSES.
Ask yourself: Is my savings enough to cover the bills, pay for future medical expenses, and help me maintain my lifestyle in case I am not able to work anymore? Remember to take these into consideration when deciding to get insurance or not.
When is the best time to get insurance?
Age is one of the several factors that affect how much you pay for life insurance. This means, Insurance premiums tend to be cheaper when you are younger.
“But what if I’m a bit older now? Is it still advisable to get life insurance?”
Yes, definitely! I have a friend who has insured her mom who is over 60 years old. Even if you have just started having dependents in your 30s and 40s, nothing beats having that peace of mind knowing that they will live comfortably in case of your untimely demise.
Where can I get insurance?
There are different options for insuring yourself and your family based on your needs and preferences.
Term insurance is a type that provides protection over a specific time frame only, ranging from one to over 10 years.
Whole life insurance provides protection for your entire life or until you’re 100.
Variable Universal Life Insurance (VUL) combines a whole life insurance with an investment component. You might also want to check if your employer provides insurance packages as part of your employee benefits.