Life Insurance In The Philippines: A Step-By-Step Guide

Life insurance is a financial security measure that protects your loved ones' future. In the Philippines, there are two major types: traditional life and variable life insurance. When considering a life insurance policy, it's important to evaluate the coverage, worldwide applicability, customer support, and inclusion of terminal illness protection. The cost of life insurance depends on age, health, and desired coverage amount. This paragraph provides an introduction to the topic of 'how to apply for life insurance in the Philippines', highlighting the benefits and considerations for individuals seeking financial protection for their families.

The two types of life insurance in the Philippines: traditional and variable

In the Philippines, there are two major types of life insurance: traditional life insurance and variable life insurance.

Traditional Life Insurance

Traditional life insurance, or whole life insurance, focuses primarily on guaranteed death and/or living benefits. This type of insurance provides coverage for the insured's entire lifetime and does not expire as long as the insured pays the premiums. In addition to the death benefit, beneficiaries are also entitled to cash accumulated over time. Whole life insurance is typically more expensive than other types of insurance but can be more practical in the long run. It is suitable for those with long-term coverage needs, such as parents of children with special needs or adults with dependents who cannot earn an income.

Variable Life Insurance

Variable life insurance is investment-linked, giving the policyholder the potential for a higher return on their living benefit, while also providing a death benefit. The values in variable life insurance are non-guaranteed as they can be affected by market performance. Variable life insurance is a combination of variable life insurance and whole life insurance, where the policyholder can choose to invest in different assets such as bonds and equities. This type of insurance offers flexible premiums and the ability to invest in the market, making it a good option for those interested in investing and buying life insurance. However, it is a riskier option due to the potential volatility of the market.

Other Considerations

When considering life insurance in the Philippines, it is important to verify that the insurance company is licensed and to check their financial strength. It is also recommended to choose a licensed insurance agent who is willing and able to explain all the details of the policy. Additionally, it is suggested to buy life insurance with coverage equal to 5 to 7 times your current annual gross income.

How to calculate how much life insurance you need

When it comes to choosing a life insurance protection plan, there is no one-size-fits-all answer. The amount of coverage you need will depend on your individual circumstances and financial goals. Here are some methods to calculate how much life insurance you need:

The Human Life Value Method

This approach estimates the future financial contributions that you will make to your family. To do this, consider factors such as your age, income, and whether you have any dependents. Once you have estimated your human life value, you can then determine how much coverage you need by multiplying this amount by a factor of 10-12.

The Needs Analysis Method

This approach looks at your current financial obligations and determines how much life insurance you would need to cover these costs in the event of your death. Consider factors such as your mortgage balance, outstanding debts, and whether you have any dependents. Once you've determined your coverage needs, you can choose a policy that meets them.

The DIME Method

The DIME method is a more detailed approach that focuses on four key areas: Debt, Income, Mortgage, and Education. This method ensures that your coverage is sufficient to cover all your outstanding debts (including your mortgage), pay for your children's education, and replace your income for the years until your children reach adulthood.

The Years-Until-Retirement Method

Another way to calculate your life insurance needs is to multiply your annual salary by the number of years left until your retirement. For example, if you are 40 years old and earn $20,000 per year, you would need $500,000 in life insurance coverage to last until you reach the age of 65.

The Standard-of-Living Method

This method aims to maintain the standard of living for your survivors if you pass away. It suggests multiplying your current income by 20 if you are between 41-50 years old, and by 15 if you are between 51-60 years old. The idea is that your survivors can withdraw 5% of the death benefit each year while investing the principal amount to earn a similar or better return.

The Income Replacement Method

This method focuses on replacing your income for your dependents. It suggests having enough coverage to replace at least 10 years of your salary. For example, if you earn $40,000 per year, you may want a policy that pays out $400,000, plus additional coverage for inflation and unexpected costs.

The 10 Times Income Method

This is a simple method where you multiply your annual income by 10 to get a quick estimate of your life insurance needs. However, this approach may not consider all your financial obligations and future needs.

While these methods provide a good starting point, it is essential to consider your unique circumstances and seek advice from a licensed agent or financial planner to ensure that your life insurance coverage adequately meets your needs.

How to choose the right provider

When selecting a life insurance provider in the Philippines, it is important to consider the following factors to ensure you make the right choice:

• Financial Stability: Assess the company's financial health by checking indicators such as premium income, assets, net worth, and financial performance. This will give you confidence that the company will be able to fulfil its obligations to you and your loved ones.
• Product Suitability: Different types of life insurance are available, such as term, whole life, and variable universal life (VUL). Evaluate which type of insurance aligns with your financial goals and needs. Consider factors such as the level of coverage you require, how long you want to be insured, and your budget for premiums.
• Customer Service and Reputation: Research the company's reputation for customer service and claims processing. Look for a company with a strong track record of providing timely and efficient service to its customers. Read reviews and seek feedback from existing customers to get a sense of their experience with the insurer.
• Licensing and Compliance: Verify that the company is licensed to operate in the Philippines by checking the Insurance Commission's list of licensed insurance firms. This ensures that the company is legitimate and compliant with regulatory requirements.
• Transparency and Communication: Choose a provider that offers clear and transparent information about their products, services, and fees. They should be able to explain the terms, conditions, and benefits of the policy in a way that is easy for you to understand.
• Flexibility and Customization: Look for a provider that offers flexible policies and allows you to customize your coverage. This includes the ability to add riders or additional benefits to your policy to meet your specific needs.
• Digital Presence and Convenience: With the advancement of technology, many insurers now offer online platforms and mobile apps that allow you to manage your policy, access related services, and even complete the application process digitally. Consider whether this is important to you and evaluate the digital offerings of different providers.

Remember to compare multiple providers, assess their offerings, and request quotes to make an informed decision. By considering these factors, you can choose a reputable and reliable life insurance provider that best meets your needs and provides peace of mind for you and your family.

How to apply for life insurance online

Applying for life insurance online in the Philippines is a straightforward process. Here's a step-by-step guide on how to do it:

Step 1: Research and Compare Different Insurance Providers

Before you start the application process, it's essential to research and compare different insurance providers in the Philippines. Look into reputable companies like Manulife, FWD, William Russell, InLife, and Paramount Direct. Compare their plans, coverage options, eligibility requirements, and prices to find the one that best suits your needs and budget.

Step 2: Determine Your Coverage Needs

Consider how much coverage you require and what your family needs. Include major expenses such as mortgages and future education costs for your children when calculating the desired coverage amount. Typically, plans offer coverage as a multiple of your annual salary (e.g., 2x, 5x, or 20x). Choose a plan that provides sufficient financial security for you and your loved ones.

Step 3: Check Eligibility and Requirements

Different insurance providers have varying eligibility requirements. Most plans have age restrictions, requiring applicants to be within a certain age range, such as 18 to 50 years old. Some companies may also require you to be a Filipino citizen or a legal resident of the Philippines for a minimum period. Ensure you meet the eligibility criteria before proceeding with the application.

Step 4: Gather Required Information and Documents

When applying online, you will need to provide personal information, including your full name, age, contact details, and address. Have this information readily available. Additionally, some insurance providers may request medical information or require you to undergo a medical exam. Ensure you understand the health declarations or requirements specified by the insurance company.

Step 5: Start the Online Application Process

Visit the website of your chosen insurance provider. Look for the option to "Get a Quote" or "Apply Now." Follow the instructions provided by the insurance company to fill out the online application form. Provide accurate and honest information to ensure a smooth application process.

Step 6: Review and Accept the Policy Contract

Once your application is received, the insurance company will process it and send you an electronic copy of the policy contract via email. Carefully review the contract, including the terms and conditions, coverage details, and payment information. Take advantage of the free-look period, typically around 10 to 15 days, to study the policy and ensure it meets your needs.

Step 7: Make the First Premium Payment

If you are satisfied with the policy contract and wish to proceed, make the first premium payment to activate your coverage. Insurance providers usually offer multiple payment options, including credit card, debit card, or e-wallet payments. Choose the payment method that is most convenient for you and follow the instructions to complete the payment process.

By following these steps, you can confidently apply for life insurance online in the Philippines. Remember to carefully review the eligibility requirements, provide accurate information, and choose a reputable insurance provider that suits your coverage needs and budget.

How to pay your premiums

Life insurance premiums can be paid in a variety of ways and frequencies. The most common payment frequencies are monthly, quarterly, semi-annually, and annually. The first premium is typically paid after receiving the policy contract for review. This is usually sent via email and standard mail.

Some insurance providers, such as Sun Life, offer flexible payment modes, allowing customers to pay annually, semi-annually, or quarterly. Monthly payments through auto-debit or auto-charge can also be arranged after the initial quarterly premium payment.

Other companies, like Paramount Direct, offer affordable premium payments with added benefits such as terminal illness protection. Their premiums remain the same throughout the payment period, which can extend up to the policyholder's 85th birthday.

It's important to note that late payments can result in the lapsation of life insurance coverage and its benefits. Therefore, it is essential to include insurance payments in your monthly budget and ensure timely payments.

Frequently asked questions