Is Insurance For Everyone? ( A Do It Yourself Test)

Friday, July 13, 2018

Do you really need to be insured?    Is insurance a need for anyone regardless of one’s stage in life? Knowing how insurance works and doing a self assessment of your needs  will help you in making the right decision even before you meet with a financial advisor.   Here’s  a way to know how.

What is Insurance?

Wikipedia defines insurance as follows:

“Insurance is a means of protection from financial loss. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss.”

If insurance is a way to keep one from incurring financial loss, then this should be a great tool to keep one from losing money!  Should we not learn more about insurance if this is a way to keep one from money problems?

Non-life insurances like car insurance provide you money in your car is stolen  or when you incur damages in case of an accident. Fire insurance for your house gives you cash to replace the value of your property. Travel insurance gives you money to compensate you in case of accident, death, travel delay or even loss of documents.

What about life insurance? Does everyone need one?  Proceeds of a life insurance is given to designated beneficiaries in case of death.  It can also have riders or additional benefits like funds for critical illness coverage, accident and total disability.

Compared to a non-life insurance, the benefits or proceeds of a life insurance goes to one’s designated beneficiaries.   On certain cases, because of some riders like a critical illness benefit ,  an insured will receive the benefits of his plan while still alive.  A  certain portion of the investment funds may also be withdrawn by the owner or insured, without penalty after 5 years or so.

When do we say now that one needs to be insured?

The answer is simple. The only reason why you should get a life insurance just like buying anything is because you need it.    Getting one requires that you understand  and are convinced of your big WHYs .

The Self Assessment Test

There is nothing like knowing what you need and understanding WHY you need it.

This simple self assessment test can help you know   whether a life insurance is something that would benefit you or not. For those who fear meeting a financial advisor, you can do your own self assessment before agreeing to an appointment. For those who have existing  coverage, this tool can help you gauge if what you have at present is enough or too much.

As an example, the self assessment form was accomplished assuming a profile that of a married man who works as an I.T. Engineer , with 3  children. His wife stays at home. By doing this self diagnosis, Juan de la Cruz answered “yes” to all the specific needs that insurance can address.   Mr. dela Cruz showed a shortfall of  P17.9M in his insurance coverage .  His self assessment result showed  income continuation as a major reason to upgrade his insurance coverage. A more thorough financial needs analysis will have to made to target educational , medical and retirement goals.

Use the self assessment form regardless of your stage in life.  A student, for example will have no income continuation concerns.  He may , however,  already get a protection with a critical illness coverage while he does not have any health issues yet.   In  a few years,  he may have a family of his own .  Getting covered at an earlier age is beneficial as his premium is expected to be lower with a higher coverage.

Through insurance, a housewife may start building her medical and retirement funds. A life insurance is also a good alternative in paying for estate tax.  A housewife, after all, still has a 50% share of the conjugal estate.

A person bound to retire in about 15 years  may opt to decrease his  coverage but should include riders like a critical illness coverage and an investment portion on his plan to  stretch his retirement funds.

Definitely, regardless of one’s life stage, a life coverage is the great problem solver to give the income that a widow needs or send your child to college. It is the best money multiplier that gives you a bigger amount of money in exchange for the affordable premiums that you pay. It is the only financial vehicle that is true to its promise to pay at a time when one loses a loved one.

Do the self assessment test. If you find yourself answering even one YES to any of the questions, talk to a financial advisor now.

Whichever way you look at it, whether you die today or live long enough, insurance will practically solve many of your present and future needs.

Life may be uncertain but being ready for life’s uncertainties is always within our hands.

Future protect your needs now!

To your success, wealth and happiness!

Your Personal Money Mentor

“Go to the ant, you sluggard; consider its ways and be wise! It has no commander, no overseer or ruler, yet it stores its provisions in summer and gathers its food at harvest.” Proverbs 6:6-8 NIV