Saturday, January 24, 2015

Insurance: Layman's Terms

This is in no way inspirational nor commercial. This is just me, talking. :)

I have always been skeptical about insurance plans because of the College Assurance Plan (CAP) pre-need educational plans issues years back (lots of Ss there). I know of some who had trouble paying their college tuition fees because CAP released their checks late, and some others who never got their checks at all. I just simply lost my trust. And when I took up Insurance classes, I realized that the insurance business is crazy, and I told myself I wouldn't venture into that UNLESS NECESSARY.

BUT necessary it is.

You see, just recently, I received an email stating that my insurance application has been approved. I am officially insured!

Why insure? What is insurance, anyway?

Imagine this: You have a seed. You give it to a farmer. The farmer will plant it in his garden. He will use the other supplies that has also been given to him by other people. He takes care of the plant. After some time, you run out of food. So what do you do? You go to the farmer and get your seed back. This time however, the seed is already a full-grown plant with fruits that you can eat. Go ahead and satisfy your hunger!

Okay, so maybe that's not the best comparison. But look at it this way: The farmer is the insurer - the insurance company. He will do anything to make your seed grow and reach its full potential so that if one day you'll need it, you won't only a the seed, but fruits as well.

Insurance is the pooling of risks. People will "pool" their money, otherwise known as premiums, with the end in mind that when the risk or loss they have insured themselves against takes place, they will be covered (more than the value of their premiums). This is possible because the insurer will use the premium payments in investments they deem profitable. So in a nutshell, that is basically it.

Why insure? RISK. Anything can happen. We will all die. We might get seriously sick or meet an accident. Good then if we live healthy until old age. In the event we die, WHO WILL PAY FOR ALL THE EXPENSES? What will happen to those we leave behind? Having an insurance (depends upon the type), will "secure" your death. Expenses will be covered. Beneficiaries will receive money. But if we don't die (yet), and decide to simply end the insurance contract, you get your premiums back plus the interest! Hello retirement fund!

Why not just deposit your money with the bank? Banks are still safe places to KEEP your money. But they don't provide you benefits when the risk or loss occurs. Interest is at a minimum (about 0.2%? Less tax) while insurance companies go as high as 27% in annual interest.

A lot could be said, I might elaborate some other time. For now, I think that's it. Just make sure you get the right insurance, one that fits your need and lifestyle. I got a life insurance. Simple and cheap with good benefits. But as my friend said, who would want to die? We're insuring ourselves for the future, not for our death. OKAY :)

Here's a list of the top 15 insurance companies in the Philippines last 2013. This is based on the company's net income. For the complete list, check out the Insurance Commission's website HERE.

Just make sure you trust your insurance company. Remember, this involves RISK. Everything involves risks. If you are not much of a risk-taker, consider other things. Perhaps hide your money under your pillow. The only risk involved is when somebody steals it.

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