Life Insurance is a protection for the family in a financial sense. “The prudent sees danger and hides himself, but the simple go on and suffer for it.” -Proverbs 22:3. Yes we trust in the Lord as the Provider, but faith has to be translated to works.
We are called to trust and believe, but that faith must be manifested through actions. Establishing some level of security in life appeals to people who believe in the importance of one keyword: Future-preparedness.
Here are the basics reasons why a young couple or a starting family should get life insurance:
1. First, the husband needs to insure the wife. He must name himself as beneficiary. If the wife is taken away from the picture (euphemism for death), the husband is left with small children.
The Filipino family is getting busier as the years go by. If the husband is the only breadwinner of the family, his expenses will increase because there will be no mother to take care of their babies, except if one relative will sacrificially step in to take care of the children… but how long? The father will still feed that relative and pay her living expenses.
If there are no relatives around, the husband should have to pay for a nanny or childcare. This will continue until the child reaches elementary school. Elementary day expenses may not end there if the husband is still at work, and the children are now at home. There must be people in the house. During school days, weekends and summer, the husband still needs to pay or at least support a house helper. That means expenses.
I’ve heard many people and stories who stopped schooling as a child to support their mother, or send their siblings to school because their breadwinner died. They were not able to avail education for themselves because they are there in the marketplace even though it’s not yet time for them to be there. Some suffer from the reality that all children stop schooling, married early or prematurely and suffer from instability of life. Some went to drugs, alcoholism, or worse, prostitution.
Without planning, support and life insurance, a family will be trapped in a vicious cycle of poverty incapable of financial freedom.
How much insurance will the husband need? I think the husband should have select an insurance with a death benefit of 10 times his annual salary. He must consider 10 years of sustaining support so that his children can take off properly in life.
Below is a forward-looking sample chart for a newly wed couple with 3 children.
[table caption=”Family’s Financial Need in Father’s Absence” width=”500″ colwidth=”20|100|50″ colalign=”left|left|left|left|left”]
year of death,child1 annual expenses at 100 per day,child2 annual expenses at 100 per day,child3 annual expenses at 100 per day, wife annual expenses at 200 per day
Sum, 182500, 182500, 182500, 365000
The figure above shows, that a family of 3 will need almost a million pesos to survive for the next 5 years in the absence of the breadwinner. But this graph only considers P100 a day for each child and does not count the factor of inflation for the next 5 years which is an average 4.5% per annum.
If the mother does not have Life Insurance, the husband has to raise this amount or get it from his savings or burrow from other family members. A prudent husband should see this probability carefully and consider investing for protection. He will see Life Insurance not as an additional wasteful expense, but as a proper and wise financial investment.
Many families suffer from the thought of insecure future. “What if I die, or become disabled?” “What if I get sick for long?” Worrying does not have all the answers for all woes, but proper money management will save a person from such woes. Without proper planning, the quality of life and the family’s future will be compromised.
The most important molding stages of a man’s life are in the childhood years. If these were filled with compromises and bad experiences, this could highly affect the future life of the child- leading to increased vulnerability and woes in their adult years.
2. Second, the wife has to consider insuring her husband. She should name herself as beneficiary (which is automatic for conjugal accounts). How much money does she need to help her sustain their children for more than 10 years? How much is the husband’s annual salary?
Unlike the husband, the wife has a big possibility of not remarrying another man. A man must be willing to marry her and spend for children that are not his own. It may take time before the widowed wife remarries, and those years in between are the years where the benefits of life insurance are needed. Where will she get the money to feed her children? Where will she get their schooling expenses? Clothing? Leisure? Medical?
If the deceased father has no life insurance, the mother will carry all the burden. Good thing if there will be relatives who will carry the financial responsibilities. But the question is, how long? Are they that financially affluent? How many of them promise? And how many are able? How willing are they to sustain the bereaved family? Who will volunteer to help the mother or at least send her daily finances to sustain her children at home?
The mother cannot go back to work when her children are still babies. If she goes back to work, she must pay childcare, or at least a nanny. Will her wages be sufficient? Will her health and time be enough to accommodate the demands of raising children, working for wages and attending other responsibilities?
3. Third, the parents should set up security for the children through a trusted guardian. The newly wed couple must consider a reliable person whom they can trust for taking care of their children’s education. The trust money can be used to help the child as he starts in life (e.g. wedding, small business, house downpayment, college expenses).
If the husband dies, the wife may marry an irresponsible person. The wife may become a target of people with wrong motives just to get the money from the inheritance. He may waste it later and the underaged children may not get the benefits. Worse case, the 2nd husband will leave the mother when all the benefits were exhausted.
So, the death benefit must be named under a reliable third party. This can be arranged with the Life Insurance company.
This person or guardian must be independent of the surviving spouse and has a high concern for the welfare of the children. He or she will claim or keep the money until the children get into the right age when they need the financial support. It is not a good idea that the guardian be a novice or a fresh college graduate.
4. Fourth, parents should consider getting a life insurance for their children. If the child dies first, the parent will receive the death benefits to support them in their retirement or old age. The parents should save this or reinvest these to be used for the future.
One Filipino characteristic is that children are to take care of their parents. When children die earlier, their parents will have a hard time in their old age. Life Insurance policy will be of great help to help these parents pay for their medical and living expenses as they get older. This can also help the parents settle a good amount of inheritance for the grandchildren, the offsprings of the deceased.
The beauty of investment-linked life insurance is this: That if nothing happens critical in one of those insured, the fund is grown over through the years. The life insurance company grows them so you can have available funds in your retirement years or even a legacy to pass on to your heirs.
As a Sun Life Financial Adviser, schedule me an appointment so I can provide you with financial advise and recommendation to help you with your needs.
Do not wear yourself out to get rich;
do not trust your own cleverness.