Term insurance is the cheapest and most affordable life insurance plan offered by life insurance companies. It is also called a pure life insurance because its only purpose is to insure individuals against the loss of life but today there are also plans that add coverage for disability and critical illness. Term insurance plans are cheap because they don’t have savings or investment component just like VUL plans and whole life plans. Term plans are designed to provide maximum protection at a minimal amount.
A term insurance covers a person for a specific period of time like 1 year, 5 years, 10 years, 15 years and so on. After the term of the plan, the plan holder may decide to renew the plan for another term but there are plans that automatically renew at the end of the term as long as the plan holder pay the renewal premium. Usually, the premium rate increases every renewal of a term plan. As a person becomes older, the premium rate also increases with old people having the highest standard premium rate.
There are many situations where getting a term insurance makes sense and here are some of them:
- You have a low income (or limited funds) and you cannot afford life insurance plans with savings/investment for now but you want to have a life insurance protection. A term insurance will cost less than 500 pesos per month so it would be affordable to an employee earning minimum wage or just above the minimum wage. Farmers, vendors, tricycle drivers, janitors, factory workers and other low income Filipinos can afford life insurance. Breadwinners really need to get at least a term insurance plan because their families depend on them financially. When breadwinners die, so is their income so they need insurance protection to replace their income for 5-1o years. (Read: Client bought term insurance to make sure that his child with special needs will be taken care off when he die)
- You want to increase your existing life insurance coverage but you have limited budget and cannot afford a life insurance plan with savings/investment for now. You will get a term insurance to increase your existing life insurance coverage. If a 1 Million life insurance with savings cost 20,000+ pesos per year, a term insurance will just cost approximately 5000 pesos per year. The good thing is you can convert your term insurance plan to a regular pay life insurance plan with savings/investment in the future when you can already afford it. Many wealthy Filipinos and Chinese Filipinos get hundreds of millions of term insurance coverage to multiply their family’s wealth and pay enormous estate taxes upon their death.
- You can use a term insurance plan as mortgage redemption insurance (MRI) with the bank where you got the mortgage (housing loan) as the beneficiary. When you die, the insurance will pay the remaining bank loan so your family does not need to worry on where to get money to fully pay the loan. Without mortgage redemption insurance, your family need to continue paying the loan or risk a default. Banks now require mortgage redemption insurance. They offer it as added service (banks usually partner with a life insurance company, also called bancassurance) but you may also get MRI from other life insurance companies. MRI premium is payable every year until the loan is fully paid up. It is not one time payment insurance. People with housing loan hate paying MRI simply because they don’t understand and appreciate its importance to their love ones or the ones who will inherit their property when they die. Without MRI, even you have paid more than half of the loan, the bank can still foreclose the property if your family cannot afford paying the remaining loan balance.
- You get term insurance if you don’t want combo plans or life insurance plans with savings/investment (VUL or Whole Life Plan) and you want to separate your life insurance plan with your investment. There are people who would like to manage their investments (mutual funds, UITFs and stocks) themselves and who believe that a life insurance plan should purely be a life insurance without the savings/investment. These people believe in the dogma of BTID or “buy term and invest the difference.” They also believe that you buy term insurance and specific period of time and terminate it until such time that you no longer need insurance because your investment is big enough to support your family when you die or to finance your medical and disability expenses. BTID is a good strategy if you are a disciplined enough to invest the “difference” but in reality many Filipinos tend to spend the “difference” to unnecessary things.
The life insurance company that I represent is the number 1 life insurance company in the Philippines. It has many affordable term insurance plans that may suit your needs and budget. Here are some of them:
A. A TERM LIFE INSURANCE WITH CRITICAL ILLNESS COVERAGE
Our company has this five-year renewable term plan that pays the face amount either upon death of the life insured or if life insured is diagnosed, while living, to have any of the 36 specified critical illnesses and, where applicable, has undergone any specified surgeries before the insured attains age 70. The plan automatically renews every 5 years with increased premium rate. This plan cannot be converted into a regular life insurance plan with savings/investment.
Covered critical illnesses include heart attack, cancer, stroke, multiple sclerosis and others. Special premium rates are also available for non-smokers^. (Read more about this plan here)
Critical Illnesses Covered
1. Heart Attack
4. Kidney Failure
5. Dissecting Aortic Aneurysm
6. End Stage Lung Disease
7. Progressive Muscular Atrophy
8. Major Burns
9. Multiple Sclerosis
11. Total Blindness
12. Loss of Limbs
13. Aplastic Anaemia
14. Bacterial Meningitis
15. Benign Brain Tumour
18. Amyotrophic Lateral Sclerosis (ALS)
19. Progressive Bulbar Palsy (PBP)
20. Meningeal Tuberculosis
21. Cerebral Metastasis
22. Loss of Speech
24. Parkinson’s Disease
25. Terminal Illness
26. Medullary Cystic Disease
27. Alzheimer’s Disease
28. Fulminant Hepatitis
29. Major Head Trauma
30. End Stage Liver Failure
31. Motor Neurone Disease
32. Guillain-Barre Syndrome
Critical Illnesses Requiring Surgery
Critical Illnesses Requiring Surgery means any of the surgeries specified and defined as follows:
33. Major Organ Transplant
34. Coronary Artery Bypass Surgery
35. Surgery for Disease of the Aorta (Aortic Surgery)
36. Replacement of Heart Valve
To give you an idea of the affordability of this plan: a male, 30 years old, non-smoker can get a 500,000 pesos insurance policy for just 4,190 pesos per year for the first 5 years. Insurance premium rate increase every 5 years. For more info, please contact me.
B. PURE TERM INSURANCE
Our company has this 5-year renewable term life insurance product that provides guaranteed maximum protection, keeping your family’s future safe as you leave nothing to chance. The yearly premium for this plan increases every 5 years. This life insurance is open for insurable persons 18-64 years old. It provides life insurance coverage up to the age of 75. This plan has no critical illness benefits, purely death benefit for the beneficiaries of the insured. The minimum face amount is 1 Million pesos with a death benefit of 2 Million pesos (200% of face amount). This term plan can be converted to a regular pay life insurance plan with savings/investment (example: Variable Universal Plans, VUL).
To give you an idea of the affordability of this plan: for a 30 year old, non-smoker male, a million face amount (2 Million death benefit) has a premium rate of 9,300 pesos per year or just 775 per month or 25 pesos per day, just the cost of 2 small bottles of coke. Please contact me to learn more about this product.
C. TERM INSURANCE WITH PARTIAL RETURN OF PREMIUM
Our company has this life insurance plan which is not actually a term insurance but it has similarity to a term insurance in terms of affordability and scheme. It is payable for 10 years and will be terminated at the 10th year (maturity date) in which 50% of the total premium paid will be returned as cash. This plan is actually categorized as an endowment plan which is defined as a life insurance contract designed to pay a lump sum after a specific term (on its ‘maturity’) or on death. Typical maturities are ten, fifteen or twenty years up to a certain age limit.
To give you an idea on the affordability of this plan: for a male, 25 years old, non-smoker, a 500,000 pesos life insurance coverage will cost 10,610 pesos per year or just 29 pesos a day. Total payment for 10 years is 106,100 pesos. The return of premium would be 50% of the total amount paid so the policy owner will receive 53,050 pesos after 10 years. Read more about this plan here. Contact me for more information and specific details about this product.
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