Purpose and advantages of life insurance: Why do you need to buy insurance?

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Why do you need to buy insurance? And when you buy one, what are the advantages of buying a life insurance policy? You may find that we cover this topic extensively in our blog, and it’s because we believe in it. We advocate for every Pinoy to get insured. 

We’ve already covered your insurance needs at different stages in life. Here in this article, we’re going to discuss just exactly why you need to purchase life insurance in the Philippines. 

1. Cover from the government is not enough.

If you are employed, you should have at least two types of cover: PhilHealth and SSS. PhilHealth provides relief during times of sickness and hospitalization, while SSS takes care of your sickness, maternity, retirement, disability and death benefit.

These government programs are not enough to provide the level of cover that you actually need.

SSS and PhilHealth only pays certain amount for each specific disease or medical condition, and you will end up paying most of the bill if you are confined in a private hospital with a critical illness such as cancer, stroke and heart attack.

2. Protect your income

Another advantage of life insurance is that you will still have money even when your active income stops. When you are not able to work, like suffering a major disease or being disabled, the insurance company will pay you benefits.

That’s why insurance is also called income protection. It protects you from life’s uncertainties, making sure that you have funds for you daily living during difficult situations.

3. Protects your wealth

You have heard of people selling their properties at a bargain price to pay for expensive medical bills. Even wealthy people can become poor overnight when emergency situations occur.

These are events that could have been avoided with insurance. It preserves your investments and assets, and in turn your net worth, from being sold off often at a lower price because you are in desperate need of money.

This is the reason it is called wealth protection. It acts as a cushion from financial ruin brought about by life-events. Instead of selling your assets—such as your house, car or business—to pay for any unexpected expenses, your insurer will help take care of them.

4. Takes care of the people dear to you

Because of insurance cover, your family can expect financial help should you die too soon, get really sick or be disabled.

It helps pay the cost of medical care. It can also take care of funeral and burial expenses in case of your untimely demise. And it may even provide your family income for a period of time to allow them to live on free from financial problems and big amounts of debts.

A life insurance, if you may, is your last act of selflessness.

5. Peace of mind

Knowing that you are insured can give you peace of mind.

It can give you a sense of security, especially that you will not have to borrow huge amount of money and that your family’s well-being will be safe if anything happens to you.

This is particularly true if you are the breadwinner. The people you love the most  will have less worries during life-threatening situations.

6. Takes care of your house

You can repurpose your insurance to protect the ownership of your house. You can specify on the policy that should you die, the proceeds will be paid to whatever remaining amount in your loan first. What it does is to ensure that your heirs will still own the house long after you’re gone. This arrangement is called MRI or mortgage redemption insurance

An MRI can be requested through your insurer and the lender. It can be done before you’re buying a house or when you already are living in one. In effect, there will be no need to get a separate home insurance. 

7. Education for your children

One of the people who would suffer when you pass away are your kids. Upon losing you, they’re not only going to be affected emotionally. They will be more vulnerable to poverty and lower standard of life. They may even be forced to stop from going to school due to lack of funds.

When you are no longer actively earning an income, your insurance can be of great help to them. They can use the benefits to ensure that they can go on with a reasonable lifestyle even after your passing and that they can go to school.

8. Build an estate

As you go through life, you may realize that it’s no longer about what you need that matters. It’s what you will leave behind, your legacy. One way to pass on your legacy is through an estate. An estate is your net worth at the time of your untimely death, including all cash, deposits, properties, and other assets. It can then be utilized for the benefit of and bequeath inheritance to your heirs, advance a social or cultural cause, or donate to charity.

An insurance can be a great addition when you’re building your estate. Because the proceeds would be released upon your untimely demise, it can be part of your net worth that would then be given to people and institutions that you value. In this way, you know that you’re leaving behind a much better world.

9. It can pay for your estate tax

If your assets are substantial, your heirs may not be able to acquire them because of estate tax. The estate tax is what is due to the government when assets are being transferred from being owned by you to your heirs. At times, the amount can be huge that some families are pushed to sell off properties or get into debts just to possess the estate.

Insurance is the perfect way to solve this situation. Because the money is made available upon death, which is the time when transfers will start, then the proceeds can be used to pay the taxes. In effect, you make sure that your inheritance will be given to the intended people.

10. Maintain the lifestyle of your family

When breadwinners pass away, families suffer. They mourn and grieve for losing the person that they love. Not only that, they suffer financially due to the loss of income brought about by the passing of the person who brings income to the household.

Insurance, when it kicks in after death, is there to help the family go on. As a source of buffer funds, they can maintain their lifestyle for months or years until they’re able to adjust to the new financial realities. It helps them to go back up on their feet, maybe look for jobs or establish a business, to go back to where they were before.

11. Pay debts

Insurance can also help in paying debts. These debts could’ve been from medical, hospice, or funeral care expenses incurred towards one’s end of life. Or, they could’ve been accumulated through the years. After you’ve long gone, they could haunt the family. This is especially true when lenders would claim a portion of the estate.

It’s in these situations that insurance can be a big help. The proceeds may be used to pay off debts. In the process, it would at least free up the family from liabilities and they could live on worry-free. Also, when debts are settled, the estate can be transferred over to the heirs with little to no issues.