A Millennial’s Guide to Buying Life Insurance

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I get it. Life insurance talks can be depressing. It has always been associated with death and who wants to talk about dying?! I was chatting with my cousin about getting a life plan for my parents and it’s just definitely not a fun topic to discuss, no matter how much you spin the conversation (“Aling kabaong ang gusto mo dito?” UGH). But my parents are not getting any younger, and being the bread winner of the family, I know I had to make sure that their memorial services are in order when the time comes.

But bear with me and read through ’til the end as I promise you, it will be worth it. If you are someone who has completely shut down the idea of getting a life insurance for yourself, hopefully this can enlighten you. However, if you are one of those who have been contemplating about getting one for quite sometime now, then you can stop reading at this point and let me tell you straight up to GO AND GET ONE.

My first encounter of how beneficial getting an insurance policy is is when my mom invested in Manulife in the late 80’s and 10 years later she was contacted by her agent and informed her that the mutual fund units that she invested in already lapsed and that she has to “encash” them. She remembers only paying less than 10k at that time so she completely forgot about it. When she went to claim the cheque, it was for over 500k!!! I really don’t know the details of the investment as I was only 12 then, but our family is having a financial crisis at the time so my mom was over the moon for the unexpected blessing.

While I think that that was awesome, when I started working at 21 I still didn’t think I need to invest or get insured because for me — investing and getting insurance plans are for adults with families and kids. Lakas maka-adulting. I am young, single and healthy, why do I have to worry about leaving money for my family when I die?

When I became 25, I was offered by a former colleague to get a Sun Life plan and I seriously considered it. But I wasn’t financially liquid at that time because I went back to college and I was paying for my own tuition. It just wasn’t a priority back then (which is a lame excuse because I was also spending on gadgets left and right).

And then I hit 30. I was suddenly in a 30-year crisis (may ganun ba?? lol) because I know that living paycheck to paycheck is not right at this age. I know I should be getting passive income already and make a portion of my money work for me. The idea of investing and getting insured all came rushing back to me. Since then it has become my goal to get my finances in order. It was really late, I know. But instead of regretting that I started so late, I figured to just channel all my energy to helping other millennials to NOT make the same mistake of investing so late in their life. Hence this article! 😉

The different forms of income:

When you are fresh out of college (ideally in the early 20s), you are currently in the active income stage wherein you earn money solely from your job. As you get older (25-40), it is expected that while you still have a good career going on, you start setting aside a decent amount of money that is earning good interest (money at work). And when you retire, since you cannot work anymore, the money you saved should be earning enough interest that can cover for your daily expenses.

Unfortunately, a lot of us get stuck at Stage 1 until we realize that we are already retiring and do not have any money to spend during our golden years. And what do we do at that point? Yup, you guessed it right — either rely on our SSS/GSIS benefits which is soooo unbelievably low or depend on our children for our food and basic needs.

I don’t know about you guys, but I do NOT want that to happen to me. I want to be able to live comfortably when I retire. And instead of me asking money from my kids, I would love to be the one spoiling my grandchildren. You’d be surprised to learn how easy it is to achieve that goal, and it all starts by learning all the basics and start making smart choices today.

WHO needs life insurance?

Back in the day, people only get life insurance to secure the family’s finances if the breadwinner dies. It is a safety net of anyone with dependents. Now, you do not have to die just to get the most out of your policy making it suitable for everyone. Parents get to secure the future of their children through educational fund, oldies get to build their retirement fund, and single, young adults get to save for any life milestone they want to achieve (i.e. car, house, travel).

WHY do you need it and why now?

Simple answer: Because you love your family and you do not want to be a burden to them.

For breadwinners, it’s kind of a given that life insurance is a MUST. It is an instant income replacement so that your family can continue to pay for everyday expenses for a limited period of time until they get back on their feet.

For young parents, aside from securing your children’s future, it is also a great preparation for retirement so you don’t become your children’s dependents when you turn 60. Please remember that your children are not investments that you can claim when you get old. Preparing for your own future is a symbol of love and getting it done early in life is the most practical decision you will ever make.

And even if you don’t have any dependents and no one relies on your salary, your life insurance can be used to cover for funeral costs and any personal loans you have when you’re still living. Also, what happens to you when you retire? Who will shoulder your daily expenses when you are not that strong and healthy to work anymore?

Watch this short Sun Life video that really struck a cord in me about the cycle of financial dependency amongst Filipino families:

And why now? Because it’s cheap. Premiums get more expensive with age so the younger you start, the bigger your savings are. Add to the fact that you can only buy one while you are healthy and insurable. Here is an analogy: Why do a lot of people apply for a passport even if they do not have plans of traveling at the time of application? It is because they do not know when the need to travel abroad will come, and they have to be prepared at all times.

WHAT type of policy is best for you?

There are several life insurance products available out there and to help you decide, it is important first to know your current life stage:

1. Getting Started – progressing in your career
2. Moving Up – getting married or having a child
3. Preparing Ahead – preparing for retirement
4. Leaving a Legacy – living in your golden years

Each life stage has different needs and therefore require different solutions. And since we millennials mostly fall under 1 and 2, the most popular policy for us is Variable Life Insurance. It’s an insurance policy with an investment component. I personally love it because you get the best of both worlds: money for your family if you live short, and money for yourself if you live long.

HOW much coverage do you need?

Your financial advisor can help you with that but if you wanna do the math, here’s the formula:

Debts – existing loans that your family will shoulder should you die today.
ex. 300,000 (car loan) + 1.2M (housing loan) = 1.5M

Living expenses – compute the amount your family needs to be able to live comfortably. This is the amount you are currently setting aside for your household bills per month. Multiply this by 12 to make it annual.
ex. 20,000 x 12 = 120,000

Extras – consider the tuition fee of children, your funeral costs, and any other necessary expenses.
ex. 500,000 (funeral cost)

Duration – the number of years you think the surviving spouse/family member can grieve w/o having to worry about money as well as the time it takes for him/her to reestablish a salary that can cover for the living expenses.
ex. 3 years

Formula: Debts + Extras + (Living expenses x Duration) = Insurance coverage

(120k x 3) + 1.5M + 500k = 2.36M

Round it up for extra padding which makes your ideal insurance coverage to be 2.5M.

WHEN should you get a life insurance?

Short answer: YESTERDAY.

To make the most out of investing in a life insurance policy, three things are important factors to consider:
TIME – start as early as you can,
MONEY – save as much as you can,
INTEREST – find better than inflation rates.

Here’s an illustration of 3 different people who invested 24k/yearly for 10 years and how much they earned at age 60:

Now let’s see how many years it will take for ₱10 to become ₱10,000,000 based on varying annual interest rates. Note that most banks have an average of 2% interest rate whereas mutual funds go for 6% to 40% per year (depending on the investment fund chosen).

So you see, when you start saving early, you give more time for your money to grow thus more savings in return. And if you put your savings in something that earns a high interest, the less time you need to reach your financial goal.

WHERE to get one?

So you’re sold on finally getting an insurance policy. Now the question is, which company should you trust in putting your hard-earned money in? Here are some factors to consider when choosing an insurance company:

1. How long the company has been in business? What is its track record (claim:settlement ratio), efficacy of the online platform (so you can view your investments real time) and reputation all over the country/world?
2. What is the company’s total assets, market share and growth ratio as compared to other insurance companies?
3. How is the quality of the service? More importantly, how knowledgeable is the insurance advisor in the coverage you’re looking for?
4. What is the claim paying process? Review their record for claim refusal (you may check this with the insurance commission).
5. If proximity is an issue for you, is there a nearby office you can easily go to if you have concerns?

And while you’re at it, here are some things you may wanna know about the insurance company I represent, Sun Life Financial Philippines:

1. 152-year old Sun Life named as 1 of 100 most sustainable companies in the world.
2. Sun Life hailed as the #1 top insurer in the Philippines for 5 years in a row.
3. Read reviews about Sun Life here.
4. Read about Sun Life’s claims process.
5. Sun Life’s offices and branch locations.

As a millennial who is currently stressed with the sheer variety of life choices we have to make on a daily basis, getting an insurance policy allows you to buy something you thought you can’t put a price on: PEACE OF MIND. It takes your worries away knowing that whatever life takes you, you and your family are financially secured for as long as possible. And the earlier you realize that, the better for you and your wallet! 🙂

Need help on planning your finances well? Kat Antonio is an insurance advisor and a financial wellness advocate from Sun Life Financial. It is her goal to guide people through the steps of successful financial planning. She can be reached at kathleenjoie.c.antonio@sunlife.com.ph.


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