Life insurance 101: money when you need it most


Posted at Aug 11 2012 07:40 AM | Updated as of Aug 11 2012 03:40 PM

This is a feature by Pru Life UK on why overseas Filipinos should invest in life insurance.

MANILA, Philippines - Life insurance is a basic need and a good lifetime financial partner.

This is a truth that most Filipinos, including overseas Filipino workers (OFWs), are still just beginning to learn, understand, and appreciate.

In other countries, life insurance is a financial requirement. In the Philippines, only a small portion of the population is insured, and most of those who are insured are actually underinsured, and their coverage is not enough to meet their future financial needs.

What is life insurance? Simply put, life insurance is your and your family’s back up funding source when you need it most – when there’s an accident, or critical illness or death in the family. And these days, life insurance is also your partner in building and managing your wealth.

Life insurance has also increasingly evolved – from a product that speaks of death and proceeds to one that has the capability to grow your nest egg and enable you to enjoy your retirement years.

Traditional life insurance defined

"Traditional life insurance is the classic insurance product, where the owner of the policy regularly pays premiums for a defined number of years in exchange for a specified amount of insurance coverage for himself or another person, usually a member of the family. In case of the death of the person insured, the life insurance company pays a specified sum to the chosen beneficiary," said Pru Life UK Senior Vice President and Chief Marketing Officer Belle S. Tiongco

Pru Life UK Market Research and Product Development Manager Tennyson Paras further explained, "Premiums are pooled into a life fund being regulated by the Insurance Commission, and the fund is managed to produce a steady return that smooths out market fluctuations and ensures payment to beneficiaries when the time comes."

Investment-linked life insurance: grow your money, too

In 2002, Pru Life UK pioneered the sale of investment-linked life insurance products in the country, making life insurance more appealing to Filipinos looking for products that could help build their wealth while at the same time financially protect them and their loved ones from unforeseen situations such as death, accident and critical illness in the family.

This two-in-one life insurance and investment hybrid changed the landscape of the local life insurance industry. “These are more known as unit-linked or UL products. While coverage is basically the same as that of traditional life, unit-linked products give the policyholder control over where his premiums are to be invested. The policyholder likewise carries the ‘risk’ of the investments. This is a feature not usually found in traditional life policies,” said Tiongco.

According to Paras, this is now the preferred product of the company’s clientele. “Pru Life UK is considered the expert in unit-linked products in the country, and we can say that more than half of our sales are already from unit-linked products.”

Protection or wealth accummulation

What are the benefits and advantages of traditional and unit-linked life insurance products?

It will all boil down to the extensiveness of the protection and savings that a client prefers, said Tiongco.

"Traditional life products are easy to understand and due to their guaranteed nature, are very reliable ‘protection’ products. Unit-linked policies can be treated as ‘wealth accumulation’ products because policyholders can take advantage of the ‘investment’ opportunities which are very well-managed and are also very reliable."

Paras also highlighted, “Unit-linked products are very flexible and provide the transparency when it comes to charges. It also offers far more choices in terms of the type of investment funds.”

Do OFWs need life insurance?

Both Tiongco and Paras offer the same answer: a quick, resounding YES.

Tiongco emphasized that the main difference between Filipinos and foreigners is that foreigners see life insurance as a basic need while Filipinos see it as a “good to have”. "We must start to recognize that life insurance is a basic need. Insurance coverage is part of financial planning."

"OFWs must learn – and this is a must, I believe – financial planning. They have put so much on the line to earn money, sacrificing being away from the family for extended periods,to provide adequate funds and resources for them. It is only right that these sacrifices pay off. How to manage the money they earn is a skill that OFWs should master, especially since their conditions are different from ordinary breadwinners," she said.

Paras likewise explained that the lukewarm attitude Filipinos have towards life insurance is partly an off-shoot of the collapse of the pre-need industry, which brought a negative perception on the life insurance industry as well. "Most Filipinos do not differentiate between pre-need and life insurance products due to some similarities of the two. Pre-need and life insurance are two uniquely different products."

There are many ways to get coverage here and abroad, according to Tiongco. “My suggestion is to get a life insurance plan even before you leave the country. Update and upgrade your coverage every time you are in town. While you’re abroad, make sure that you have access to accident and health insurance, at the very least. “

“Investing abroad may require a lot more education, but investing locally is something one can do very easily,” she added.

Paras also shared, “Most insurance companies, including Pru Life UK, have developed products that are relevant to the different needs of Filipino families. We have different solutions for each market segment.”

Insurance is all about having money when you need it the most, said Tiongco. “The important thing is to ensure that whatever happens to you, your family must be able to continue to survive financially. Life insurance, in its many forms, can fulfill that.”

Pru Life UK is a subsidiary of Prudential plc, a United Kingdom-registered company. Pru Life UK and Prudential plc are not affiliated with Prudential Financial, Inc. (a US-registered company), Philippine Prudential Life Insurance Company, Prudentialife Plans, Inc. or Prudential Guarantee and Assurance, Inc. (all Philippine-registered companies).

Pru Life UK is a life insurance company and is not engaged in the business of selling pre-need plans.

Pru Life UK is a member of the Philippine Life Insurance Association.