“Life Insurance Is Expensive!” 3 Misconceptions About Getting Insurance In Your 20s
As the saying goes, it is better to be safe than sorry.
If you’re a young working adult, earning your own keep is such a fulfilling experience, especially if you are able to set aside money not only for your needs and wants, but for your life savings too. This is especially important while you are still young and active -- with all of life’s uncertainties, it is always best to prepare for the worst.
As young as you are, it is a must to manage your finances well and think about where your money should go. While you’re still healthy and working, one of the best things you can do is to get a life insurance.
“But I’m still young!” you might argue. Indeed, why should you get an insurance when you’re fit and able?
The short answer is this: “Younger people have lower premiums,” says Marichu Cruz, a financial advisor from Sun Life Philippines. “Also, insurance companies require older people to be in good health before they [could get] one,” she adds.
“A life insurance is a contract between an insurer [insurance company] and the policy holder, where the insurer gives a certain amount to the policy holder in exchange for a premium,” she says. It is important because it can help your family with their finances once you’ve passed, or it could also serve as your retirement fund.
Many years ago, insurance companies only marketed their products to older people, but a shift to the younger market is slowly happening. Nonetheless, certain misconceptions persist, like the following:
Misconception #1: Young people don’t need life insurance.
Andrea Alcaraz, a news writer, got her insurance from Sun Life Philippines in February 2020 at the age of 21.
“I wanted to secure my future while I can and while I don’t have much to spend on,” says Andrea, who pays her premium twice a year.
She also understands how her insurance could help her finances in the future. “Nobody wants to go crazy one day when money is needed and I definitely don't want to work for the rest of my life,” she says.
Andrea does not agree with the common belief that young people don’t need insurance.
“Life is unpredictable, and anything can happen, so [an insurance is] not only for old people or for those who have illnesses, but for everyone,” she says.
For Camille Aguilan, a financial consultant, life insurance is important for young adults because it will prepare them for uncertainties in life such as accidents, serious illnesses, or death.
“Having a life insurance at a young age gives you more opportunity to save for a low-cost investment with a higher return,” she says.
Sun Life, for example, has variable universal life insurance for young adults. “These are insurance investments, which means the funds that a young individual pays will be used to buy shares in stock markets, bonds, index funds, etc.,” says Marichu. “The payment for these VULs usually ranges from 5 to 10 years.”
Misconception #2: You (or your family) can only benefit from your insurance policy after you die.
At the age of 21, Neil Galino, a junior food technologist, has already acquired two policies from Pru Life UK. He got both on his last year in college after life insurance agents from different companies messaged him.
“I didn’t have any idea at the time, but because they were messaging me, I got interested and Googled about insurance and the products these companies have to offer,” says Neil.
Armed with research, Neil knew that getting a life insurance is essential because it provides coverage for sudden emergencies like accidents, disability, hospitalization, and death.
For Neil, life insurance is like a safety net and emergency fund. “It gives me peace of mind knowing that whatever happens to me, my dependents won’t worry about medical bills [should] I need money for recovery or income replacement,” says Neil.
“Insurance? ‘Di ba magagamit lang yun kapag patay ka na?” is a misconception Neil hears often.
“Actually, most insurance policies nowadays have an investment component, so you can use that [while] you’re healthy and alive,” he says.
Neil sets aside money from his salary to pay for his life insurance – it’s one of the things his financial advisor taught him: how to budget his salary.
“Start getting life insurance as soon as possible, even if you’re a minor. Encourage your parents or guardians to get you one [and] help increase financial literacy in the Philippines,” says Neil.
Apart from the cheaper premium cost, what makes life insurance attractive to young adults today is that it now includes investments.
“Mas promising ang income potential dahil medyo mahaba-haba pa ang pag-iipon,” says Elsa Tan, a financial advisor.
She adds that young adults should obtain a life insurance early on since a person’s productivity is pegged at up to 50 years old only.
Misconception #3: Getting an insurance is expensive.
After working for a year as a junior administrative associate, Regina decided to get a life insurance from Manulife Philippines.
The 22-year-old believes that this will serve as her protection from unforeseen events and will prepare her for the future.
“Insurance will be my income security in case of sudden disability or death. It also includes investments, which will come in handy in the coming years,” says Regina.
“Many people are saying [life insurance] is too expensive or dagdag gastos lang, but medical bills are expensive [too], which really puts the costs of insurance in perspective,” she explains.
She adds that life insurance is a definite lifesaver because it gains interest over time and will be at your disposal when you need it the most.
As a recent policy holder, Regina found it difficult to manage her finances in the beginning but came up with a budgeting plan to help allocate her money accordingly.
“In the first month, I struggled with managing my money since it’s my first time to get an insurance but as the days passed, I learned how to portion my income between savings, needs, wants, and insurance,” she says.
Getting a life insurance has made Regina more conscious about where her monthly salary goes.
“There’s no such thing as ’no risk,‘” she says. “[Having insurance] will help you get through tough times,” says Regina.
Elsa sums it up nicely: Getting a life insurance is an act of love -- for yourself and your loved ones. “Ingatan natin ang ating mga sarili at mag-invest habang bata pa.”