Generally, Insurance is a contract or an arrangement by which a company or government agency provides a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a premium. Insurance such as precious metals is a type of long term investment.
The return of this type of investment is mostly felt in the long run that is why most of the Filipino population are considering insurance as just an additional expense. It has always been the common drawback in investing on insurance.
Although Insurance for the Filipinos is the least priority, For the third quarter of 2017, about 48 million lives are covered by life insurance policies. Over the years, there has been a considerably steady growth.
Savings is the amount of money that is not used nor spent and is being kept mostly in the bank or in your piggy bank for a certain period of time. “Save for the rainy days”, The most common practice of most Filipinos.
Twenty percent of the household budget is allocated for savings purposes, With the assumption that most of the Filipinos are disciplined enough to set aside a portion of their income for their savings. Most of the population think of savings as the best resort when it comes to emergency situations like hospitalization, accidents, calamities and sudden death.
Let’s do a simple comparison:
Maria, 35 years old, has saved a substantial amount of Php2,000. 00 per month for the past 10 years. Her total savings would be Php240, 000.00.
*note: interest rates and withholding tax was not included
Juan, 35 years old, has been investing on insurance with an annual premium of Php24,000.00 for the past 10 years. His insurance policy is worth Php1, 000,000.00.
Maria and Juan happened to be in a vehicular accidents. Both of them was hospitalized. Their total hospital bill were Php200,000.00 and Php230,000. 00 respectively. Maria used a portion of her savings and was left with Php40,000. Maria will have to use the amount left from her savings for take home medications. Juan, on the other hand, used his insurance to pay off his hospital bills and his home medications and he still has more or less Php750, 000.00 left on his insurance policy.
Both of them paid their bills off but who among them was better off? Be financially literate. Talk to a financial adviser and start with your investment as early as now.