Tuesday, July 1, 2014

Why I Was Afraid of Insurances, and Why I Was Wrong

A few months ago, I’ve been haggled more than twice by different insurance agents of various insurance companies. At my age of 36 today, I don’t have much of an idea how an insurance could help me in any way. But I was interested to hear the offer that these insurance agents gave and frankly, none of them convinced me.

I somewhat understand that the purpose of an insurance is to help the insured person during times of distress, a distress usually in the form of accidents. At such times, an insurance company will be willing to lend assistance in the form of cash, but in order to do so, the insured person needs to make a periodic deposit of a certain amount of money, albeit with conditions, to the insurance company in order to gain such a service. This is where the hard sell begins.

Why Would I Give Away My Money?

After pitches like “what if all of a sudden you had an accident and you have no money at hand”, “how can your family cope when you suddenly die”, “where will you get help if unexpectedly you cannot work anymore”, etc. blah, blah, the agents got me. I listened intently and was even ecstatic at times. That is, until I hear the words, “deposit”, “amount”, and “monthly”. I mean common you sloth of an agent, I have bills to pay, mouths to feed, and I can’t even help myself to save some for simple emergencies, and you want me to give you money that I might NOT be able to use because only during times of distress will it be accessible? Who in the right mind would do such a thing?

I never said those words to the agents, perhaps out of respect for their profession, though I was wondering what they could say if I did. For me though, the money that I would presumably give to these insurance companies could be used for something better like a capital for a small business or buying more essential things for my family. In a small business, I could have GAINed something. Yes, that’s the word “GAIN”.

Isn’t it the reason why we save our money in banks? Because we believe that banks let our savings grow, in other words, we GAIN when we save money in banks. We even go a bit further by making time deposits just to take advantage of a slightly higher interest rate. I don’t know if any insurance company offer some form of a savings/insurance system, but if any of them does, can I withdraw money at any time? There’s nothing to be gained from giving your money to some corporation which doesn’t even let it grow.

That’s everything I know about insurance companies at this time. I know I shouldn’t compare a bank with an insurance company, but between the two, I’d choose a bank. Until someone finally explained to me why I am wrong.

Why We Actually Need Insurance … and More

Image courtesy of Naypong / FreeDigitalPhotos.net

Yesterday, a colleague in our office started to check the machines we were using. It was an inspection whether the machines were under insurance. Our colleague mentioned that, if ever a fire broke out, the machines are COVERED. That got me thinking, if them non-living machines in our office were COVERED for insurance and is a must, isn’t it more important that we, living blood and flesh, are insured and ready for such calamity that might befall us? It was indeed a wake up call, but I’m still not persuaded by insurance alone. It took something more to make me believe in insurance, and that was a few weeks ago, when one of my best friends which I haven’t seen for 17 years introduced me to a plan that encompasses an insurance, a savings, and a mutual fund.

Some months back, I was bothered by my family’s current rat race situation. The way we spend our money is an opaque thing for me. I don’t know where all our money was going. At the end of a week after payday, there’s just nothing left to what was once a treasure chest. My wife and I would always quarrel about our finances. I kept asking WHY there’s no money left, and she would always say, there’s just not enough to cover for everything. NOT ENOUGH? But we’ve been working like carabaos the whole month, how come we’re staring at an empty wallet? Why isn’t there any savings left? It was then that I decided, our financial woes needs to be resolved.

I first looked at investments which many on the internet have suggested. This directed me to understand things like the stock market, which I am very interested to dive in. But with no money to put into it, I was currently studying a system that perhaps I’d be able to join in next year 2015. During these maydays, I was able to get in touch with an old friend from college who happens to be a financial advisor. He introduced me to a plan that included a savings, an insurance, and best of all, a mutual fund. I was very excited to talk to him. And when we did talk, he was able to elaborately explain the importance of insurance, but again that did not catch my attention. What caught me is the combination of mutual fund and insurance. I thought, since I’ve already protected myself, why won’t I go further and GAIN something from all of this and have a mutual fund also. I won’t go into detail about mutual funds, but it’s something like putting your money in a bank, only the interest is much higher and the GAINs are better if you let the money sleep for a very long time. It’s under the subject of investing and I suggest to the reader that they look into it, as I still do.

An insurance and mutual fund is a winning combo in my opinion. My friend illustrated insurance like a back up tire for your car. You never really want your car to go flat on the street, but if it ever happens, you’ll have an extra tire to continue the trip. The same thing goes with insurance. You never really want anything bad happening to you, but if ever that time comes, you’ll have some assistance to help you move on. Catchy, but I didn’t take the bait. I may live long enough with an insurance yes, but what is there to live for if I see my family suffering from poverty? The money that insurance could probably give is money enough for burial expenses. Yes, assistance for a simple accident is reason enough for it, but what of the future? Mutual fund was the answer. By the time the investment in the fund has matured, I’d leave enough for my family to make it through the rainy years. That’s where I took the bait, and I’m glad I did.

Why Everyone Should Consider Having an Insurance and a Mutual Fund

Before I met with my financial advisor, I was overwhelmed with anxiety as to where my family’s life would go. It was like sailing without a compass. But after a vibrant one-on-one discussion with my friend, my path is finally clear. Learning how to become financially independent is substantial in people’s lives. It is something that’s never taught in school, but is essential all the more.

My anxiety is still here, but now much less. I feel safe because of an insurance policy, and am looking towards a bright future because of a mutual fund. A certain peace of mind envelops me every time I think about it. Best of all, I’m not only helping myself, most importantly, I’m helping my family, and I’m helping my country’s economy too because of the fund. It’s a WIN-WIN situation, and all in life is good.

Note: The plan that I’ve actually mentioned in this rant is a Variable Universal Life (VUL) Insurance which SunLife Philippines offers. Prulife UK and AXA Philippines seem to offer the same plan. I’d like to point out that not many people agree with VUL insurances. Find out what plan works for you and your family. Besides, it’s our responsibility to secure our own future.