Building a Secure Future: How Insurance Plans Provide Peace of Mind

If you ever find yourself scratching your head over insurance, you’re not alone. Sorting out which insurance company, let alone an insurance plan that gives you the best perks, matches your needs, and is worth the money can be pretty confusing.

The insurance sector in the Philippines has experienced significant developments in recent years, including increases in gross premiums, assets invested, and sector income. However, despite these advancements, there is still room for improvement, indicating that the sector has a long way to go. For instance, while the insurance penetration rate slightly increased by 0.22% [1] during the third quarter of 2021, it went back down to 1.72% in 2022.

Moreover, although there has been an increase in life insurance applications [2], particularly among consumers under the age of 45, there remains a gap in terms of the percentage of Filipino adults who own life insurance policies. The Financial Inclusion Survey of the Bangko Sentral ng Pilipinas indicates that only 23% of Filipino adults owned life insurance in 2019 [3]. This reflects the need for greater outreach and accessibility within the insurance sector.

But not having a grasp on insurance plans can leave you vulnerable to life's troubles. Dealing with unexpected medical bills without financial protection in place can be incredibly stressful. In this article, you're about to explore the benefits of insurance plans, and by the time you finish reading, you'll realize there's nothing to be intimidated about.

Understanding how insurance plans are safety nets

Insurance plans are like your safety nets. They're there when things go unexpectedly wrong, like accidents, getting sick, or damage to your property. You pay regularly, called premiums, and in return, if any of those unfortunate events happen, the insurance swoops in to help you cover the costs by receiving compensation or reimbursement according to the terms of their policy.

Speaking of safety nets, there has been a noticeable shift in attitudes towards insurance among Filipinos, with more people showing openness to getting insured. One significant catalyst for this change has been the COVID-19 pandemic, which has served as a wake-up call for many individuals and families, prompting them to reassess their priorities and take proactive steps to safeguard their financial well-being. The accessibility of insurance products has contributed to the growing interest in getting insured.

There is a range of different insurance plans for different purposes available in the Philippines. However, there are still factors that contribute to the persistent gap in insurance coverage, including lack of awareness and affordability issues. Many Filipinos, particularly those from rural or underserved communities, are unaware of its benefits and its different varieties.

For instance, if you're living in a rural area or you're not well-connected, you might not even know where to start looking for insurance companies or who to ask for help. You would have probably heard about it, but you wouldn’t understand how it works or why it's important. As a result, insurance literacy remains low, with many individuals not fully understanding the benefits and protections that insurance can offer them and their families.

A study conducted at Visayas State University among faculty members found that those with higher levels of education tended to have more positive attitudes toward insurance, hence their likeliness to acquire life insurance coverage. The research also shows that the more folks understand about insurance, the more they tend to get it. This highlights the importance for insurance companies to create more interesting and specific ads, especially for those with less education.

However, there is still a considerable portion of the population coming from low-income households, and the cost of insurance premiums can be prohibitive. In other words, insurance can be pricey, and for a lot of people, it's not something they can afford right now. They're already struggling to make ends meet, so putting money into insurance isn't exactly a top priority.

In such circumstances, insurance tends to take a backseat as it is perceived as a non-essential expense. Financial resources are already stretched thin, leaving little room for additional expenses like insurance premiums.

And even those who can afford insurance plans feel intimidated by the complexity of insurance terms and conditions. The sheer volume of information and the technical jargon involved can be overwhelming, and it can make one feel vulnerable. This can also create a pervasive fear that insurance agents may not always have their best interests at heart leading to concerns about potential dishonesty or being misled.

Unfortunately, some insurance companies have been known to use misleading marketing tactics or obscure terms and conditions so it’s understandable that there would be a sense of apprehension. In fact, the sudden closure of pre-need non-life insurance companies, such as College Assurance Plan (CAP), is also one of the reasons Filipinos tend to shy away from insurance, thinking that pre-need insurance is the same as life insurance. This is why Pru Life UK's commitment to openness not only helps to dispel misconceptions and apprehensions but also boosts trust and confidence among policyholders.

While more Filipinos are getting on board with insurance, there's still a lot of work to do. Comprehensive financial literacy programs and targeted outreach campaigns can help debunk myths and empower Filipinos to make informed choices about insurance. Efforts to make insurance more accessible and affordable, particularly for marginalized communities, are also essential in narrowing the coverage gap.

How insurance plans bring peace of mind

Nobody likes to think about the worst-case scenarios. However, life's uncertainties–whether they manifest as medical emergencies, wage or job loss, or natural disasters–underscore the importance of insurance. It represents a strategic investment in one's future and a buffer against the unforeseeable events that may lie ahead.

Investing in one's future and prioritizing health are intertwined aspects of personal well-being that mutually reinforce each other in a positive feedback loop. For example, people who plan for retirement may adopt healthier lifestyle habits to make sure they have the vitality and energy to enjoy their later years.

This is also not just about protecting yourself—it's also about safeguarding the future of your loved ones, especially if you're the main provider for your family. This is particularly crucial for migrant workers in the Philippines, where there's a strong culture of relying on a “breadwinner” for financial support. Thus, having insurance means you're not leaving your family high and dry in the event of your untimely passing. It's peace of mind for you and security for them.

Research from the Swiss Re Institute reveals that an estimated 75% of households in the Asia Pacific region will face financial stress in the event of the death of the main breadwinner. This gap between the financial needs of the family and the protection in place is known as the mortality protection gap.

Therefore, having an insurance plan allows you to redirect your attention toward more positive pursuits without the constant burden of anticipating problems. Anxiety often stems from the fear of not being able to cope with or find a solution to problems. So when you have an insurance plan in place, you're essentially proactively addressing this fear, as you have a solution readily available should the need arise. This can also provide a tremendous sense of relief and allow you to approach life with greater confidence and resilience.

Kinds of life insurance plans in the Philippines

When it comes to insurance, it’s not a one-size-fits-all approach. There are all sorts of insurance plans out there, each designed to cover different aspects of your life and protect you from various risks. The key is to figure out the coverage you need and then find the right insurance plan to match.

You have to be proactive about selecting your insurance plan.

Choosing an insurance policy is a decision that shouldn't be taken lightly.  People should prioritize understanding the importance of having the right coverage instead of just skim over the details or settle for the first policy. Therefore, being informed about the different types of insurance plans available in the Philippines is already the first step:

1. Health insurance

Let's say you come down with a nasty case of the flu. You visit your doctor for a check-up, and they prescribe you some medication to help you get better. With your health insurance, you can reimburse the amount you paid for each time you visit the doctor. The rest of the bill—covering the doctor's consultation fee, any tests or treatments, and the cost of the medication—is covered by your insurance company, up to the limits of your plan. There’s the Pru Life UK Health Insurance for when you're dealing with hospital bills or facing a critical illness.

There are different types of plans out there, like HMOs or Health Maintenance Organizations, which means you need to stick to a network of healthcare providers chosen by your insurance company. These plans usually have lower premiums but require you to choose a primary care physician who will manage and coordinate all of your healthcare needs.

2. Term insurance

Term insurance is a type of life insurance that provides coverage for a specific period of time, known as the "term." It's like renting insurance protection for a set number of years, rather than owning it permanently like with whole life insurance. 

For example, you buy a 20-year term life insurance policy. If you were to pass away during those 20 years, your beneficiaries would receive a payout, known as the death benefit, from the insurance company. This money can help replace your income, pay off debts, cover funeral expenses, or provide financial support for your loved ones.

It is often a popular choice for people who want coverage for a specific period, such as while they're raising a family or paying off a mortgage. It tends to be more affordable than permanent life insurance because it doesn't include a savings or investment component—once the term ends, the coverage expires, and there's no fund value.

3. Accident and personal disability

Accident and personal disability insurance are two separate types of coverage, each designed to provide financial protection in the event of unexpected circumstances.

Accident insurance, sometimes referred to as accidental death and dismemberment (AD&D) insurance, provides a lump-sum payment if you suffer an injury or death as a result of an accident covered by the policy. This coverage is typically broader than traditional health insurance, as it may provide benefits for a wide range of accidents, including car accidents, falls, and other unforeseen incidents.

Now, let's say your injury is more serious and prevents you from going back to work for an extended period. Personal disability insurance, on the other hand, provides income replacement if you become unable to work due to a disability caused by illness or injury. It provides you with an  income to help cover your bills and living expenses while you're unable to work so you can have some financial breathing room until you're back on your feet. 

At Pru Life UK, you are covered with top-notch insurance products. PRUShield, for one, is a term insurance—but it's not just your run-of-the-mill life insurance. It's got hospitalization benefits too, so if you ever find yourself in the hospital, you can focus on getting better without stressing about your income.

4. Insurance with investment 

The insurance with investment policies combine a death benefit—the amount paid to beneficiaries when the insured individual passes away—with a fund value component that accumulates over time.

Here's how it works: When you pay your premiums for a whole life or universal life insurance policy, a portion of that money goes towards the death benefit to provide financial protection for your loved ones. The remaining portion goes into a fund value account, which grows over time on a tax-deferred basis.

The fund value component of these policies can serve as a form of investment, as it earns interest or returns based on the performance of the insurance company's investment portfolio. Policyholders can typically access this fund value through withdrawals, which can be used for various purposes such as supplementing retirement income, paying for college tuition, or covering other financial needs. 

It's important to note that insurance with an investment component often comes with higher premiums compared to term insurance, which provides pure death benefit protection without a fund value component. Additionally, the returns on the fund value portion of these policies may vary depending on market conditions and the insurance company's investment performance.

Also, these funds are not solely intended to maximize the death benefit for the policyholder's beneficiaries but rather serve as a flexible resource to address different financial goals and obligations throughout the policyholder's life.

Times have been tough in the Philippines lately. Between economic challenges, health concerns, and environmental crises, it probably feels like you’re constantly swimming upstream. And even if insurance seems out of reach right now, just knowing what options are out there is a huge step in the right direction.

Build a Secure Future with Pru Life UK

Ready to take control of your financial future? There's a wide range of insurance plans available in the Philippines, each designed to cover different aspects of your life and protect you from various risks.

Contact Pru Life UK today to learn more about our insurance solutions and how they can benefit you. Visit our website for FAQs, or connect with us on Facebook to stay updated on the latest news and offerings. Your peace of mind is just a click away. Let's secure your tomorrow, together.

References:

1. Share of the insurance industry to the gross domestic product (GDP) of the Philippines from 2016 to 2022. Statista. 2023.

2. Assessment of the Asset Management Industry in the Philippines: The Case of the Variable Unit-Linked Insurance Sector. Socioeconomic Research Portal for the Philippines. 2023.

3. 2019 Financial Inclusion Survey. Bangko Sentral ng Pilipinas. 2019.