Protect Yourself from Your Insurance Policy

By Ma. Esther Salcedo-Posadas

Many Filipinos have been burned by one too many pre-need, and even insurance, companies. Since both industries thrive on trust and integrity, it is quite hard for many to reconcile both promise and reality. In fact, even the world’s largest insurance company has not been exempt from financial mishaps that have recently tainted its golden image. Nowadays, it is not enough to make a decision based on a brand name. It’s imperative to take control of your financial life. Ironically, you have to protect yourself from unscrupulous or unstable insurers and pre-need providers. So before you place your hard-earned money in an insurance policy or pre-need plan, keep these things in mind:

Do the numbers yourself. In the past, many plan and policy holders simply accepted whatever the actuarial report presented. They considered the insurance plan as “forced savings” and thus did not think much whether the return or insurance coverage was actually worth the money put in. Ask your financial planner what the annual rate of return is and compare it with market values, plus make your own projections. Some investors prefer to invest their own money for the simple reason that they think they can earn more doing it themselves – but that also requires discipline in managing and saving the funds for a gloomy day.

On the other hand, an average investor may feel safer entrusting his money to an expert. This is where the critical question lies because it is not always easy to spot the best person (or company) for the job. In this case, getting good financial advice as well as diligence in doing your own research and calculations is crucial. You are going to spend many years paying for the insurance coverage so it better be worth your hard earned sweat and tears. If you are not adept with numbers, get some financial education before you entrust your money to someone else.

Emmanuel Atienza, a father and primary breadwinner of his wife and two kids has invested in life, health, and memorial plans but not in an educational plan. He feels that the return on investment from the new educational schemes is not acceptable and that he could do better elsewhere. However, he feels the necessity in making sure that life’s emergencies are taken care of because he doesn’t want his family burdened if something happens to him. “If I die, my life insurance will help cover my family’s immediate needs.”

Read the fine print. Even before signing the insurance or pre-need contract, make sure that you read and understand everything including the fine print.  If there is one point that you do not comprehend, don’t be ashamed to ask your financial planner about it. Also find out what your alternatives are in case you may want to cash out early or perhaps decide to end the contract prematurely.

Develop an exit strategy. Not all perfectly laid out plans happen without hitch. Therefore, it is important to think of different scenarios, in case you may need the money at a time that you least expect.

Invest in products that make sense to you. If you don’t understand it, don’t do it. Simple as that may sound, many new investors are lured into complicated hybrid products that they themselves cannot explain. For example, if you discover that an insurance product (that is guaranteed) is offered back-to-back with a mutual fund option (that is not guaranteed), will you take it and why? It’s important to ask yourself simple questions before proceeding further.

Get used to uncertainty. Learn to play the game of uncertainty because the past and the future are worlds apart. For many people, that realization means learning how to be entrepreneurial in many aspects of life. Such a paradigm shift will affect the way you view insurance, in general. After all, we pay big sums of money because we want the assurance of predictability. You have to ask yourself whether that idea holds true to this day. However, bear in mind that there are insurance and pre-need companies with untarnished track records and who have actually lived up to their names. The responsibility of finding that proverbial needle in the haystack rests in you.