Question: What are the right criteria for choosing a good life insurance? – Jeremy Jessley Tan (@jeremyjessley) via Twitter

Answer:

Let me congratulate you first for your decision to consider life insurance. Although hugely important in personal financial planning, life insurance like many other financial instruments, aren’t really on the top of mind of many Filipinos. The percentage of our insured population is so low we are subjected to so much personal risk that will have a devastating effect to our lives.

I’m not sure if your query relates to life insurance programs or life insurance companies so let me just try to answer both.

Before buying life insurance, it is important to determine if you need one or not. If there are people dependent on your income like your spouse, children, parents or siblings, then chances are you really need one. On the other hand, if you are single and have no one who depend on your income – you probably would want to defer buying a life insurance policy until such a need arises. If you are considering buying a life insurance policy strictly as an investment, do consider other instruments that will suit such a need. Life insurance should be purchased because of the need to manage life’s risks, primarily against untimely death and serious physical breakdown (disability). Accumulation of life insurance fund values for investment purposes should only be a secondary reason – icing on the cake so to speak.

It is wise to first determine the amount of life insurance you need. A professional insurance adviser should be able to do an honest to goodness insurance needs analysis for you or better yet, make one for yourself. Here’s a simple way for you to determine the amount of insurance you need. On a sheet of paper (or excel sheet if you must), divide into two parts vertically. On the left side, put a heading and call it “Needs” and on the right call it“Sources”. Under the needs section, think of expenses that needs to be paid should you experience untimely death like hospitalization, burial costs, any outstanding obligation and about 3 months worth of expenses (label this as miscellaneous) – get the sub-total and label it as “immediate expense”. If you have any schooling children, it is best to determine education needs also as this will be a primary concern of those who you will leave behind. A simple way to do this is to get the estimated yearly educational and multiply it by the remaining number of years until they graduate. There’s no need to compute for the future value of education as we are merely allocation an educational fund that should be invested eventually. Label the sub-total as “educational expenses”. The 3^rd and final component of your “Needs” section is determining the living costs of your loved ones. Multiply your monthly need by 12 to get the annual expenses as it is easier to plan on an annual basis. Divide the annual amount by an estimated investment rate. The sum is a fund that can be invested to give perpetual interest payments to be used for living expenses.

On the right side of your sheet called “Sources”, try to think of all the sources that can generate funds should the need arises such as cash, investments, real estate and life insurance proceeds. It may not be a good idea to include your home as a source of cash as your family will need to keep the home.

Deduct the total sources from your total needs and the balance is an amount you should consider for additional life insurance. Note that life insurance is not your only option to narrow the gap between needs and sources but it is definitely the cheapest and fastest way to bridge the gap. Life insurance can also be a temporary solution as you build your other assets like cash, investments and real estate.

Below is a simple illustration on how a life insurance analysis may look:

Now that you know how much you need, the next thing you need to determine is what kind of life insurance you should get and from which life insurance company should you buy from. I will try to answer those in the next instalment of this column.

… to be continued.

The Insurance Commission has released the ranking of the top Life Insurance Companies as of 2011 according to total premium income.

For the first time in its over 100 years of operations in the country, Canadian insurer Sun Life Financial emerged as the number 1 life insurance company beating the perennial leader Philamlife by a narrow margin of about 300 million in premiums. It will be interesting to watch out how the two largest life insurers will fare for 2012. Will Sunlife continue with its market leadership or will it be short-lived and concede it to Philamlife? My friends from both companies are all pumped up and this will be a good match to watch. Personally, I always believe that competition is good for everyone.

The French insurance company’s partnership with Metrobank continues to grow its Philippine business as Philippine AXA steadily holds on to the 3rd spot while Prulife of UK maintains its 2010 position as the 4th largest provider of life insurance in the Philippines. It is interesting to note that the revenue difference between AXA and PruLife is now only about 80 Million. Will we see changes in the 3rd and 4th ranking as well for 2011?

Insular holds its 2010 ranking of #5 but you will see that the Bancassurance partnership of BPI and Philamlife is closing in with only a 100 Million premium difference. The next 5 rankings are dominated by Bancassurance organizations which is an indication on how life insurance has been distributed in the past years.

2011 also shows the continuing shift of the types of life insurance being sold — from traditional policies to Variable Universal Life or Investment Linked plans. The deteriorating returns of interest rates seem to be a challenge for traditional life insurance plans to keep its marketability forcing buyers (and sellers) of life insurance to consider investment linked products even if they are not guaranteed.

While I’m ecstatic at the growth of the life insurance industry and I’m actually cheering on my friends in the industry, my issue has always been the same — there are not enough Filipinos with life insurance benefits. As of 2010, the Insurance Commission said that there are only 3.3 Million policies that remain in-force. 3.3 Million policies does not mean there are 3.3 Million Filipinos covered as many of those who buy life insurance will have multiple policies.  In the same report, the Insurance Commission disclosed that there were only about 315,000 new policies issued for the year 2010. My prayer is that growth in the life insurance industry should not just be limited to looking at premiums and we put the same passion into having more lives covered. Financial security given by a life insurance policy is very important to Filipinos as we are constantly faced with the uncertainties of life.

It’s great to see more and more life insurance companies taking a more active role in providing financial education which I believe is the real key to a sustainable growth for the whole industry. It’s just that we just need to do more, push more, teach more, advocate more and educate more.

My 2 cents.

I rarely re-post blogs of other people but I am making an exception for this one.

My dear friend and TV5 Reporter & host of the Golden Dove nominated Radio Program Oplan Asenso (92.3 FM)  wrote something that I feel should be read by others. Michelle Orosa – Ople was covering an event at the Insurance Commission regarding the failure of a pre-need company and the anguish of those affected. Her blog is not only insightful, it is moving. Many times, media practitioners and writers just write about events, report the news or voice their opinions but I salute Mich for her empathy and being bold in voicing out her convictions. It’s people like Mich that makes me hopeful of the future of media. Way to go Mich, I salute you for your ‘feelings’.

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The blessing of feeling by Michelle Orosa-Ople

This was a scenario The Bad News Reporter—myself, often dubbed as such—had covered one too many times before: an angry crowd, officials scrambling to explain a wrong, microphones abuzz and an annoying scarcity of monobloc chairs. It was the same story all over again with only a different set of characters, a different set of figures and a stronger deluge of raw emotions. Today was, after all, the first time everyone got together in the pseudo arena called the Insurance Commission. Everyone knew it would be a box-office, action-packed hit for the news.

With a waiting-to-give-a-go-signal eye on my cameraman I cased the battlefield. The numbers were good: several hundred angry people in a room where tension was so thick that one could feel it in the air.

And then it started.

As the officials wrapped up explaining the problem and their proposed solutions, a woman grabbed the mic and harped her grievances right then and there. Cameras rolling, people around her caught the spark, fanned the flames, and soon were cheering beside her. They were tired of the jargon and numbers. They wanted action. The organizers managed to restore order among the madding crowd, but once the open forum started, the room was again filled with anguished voices tinged at times with frustration. Raw anger. Tears.

I was initially caught up in the usual motions of noting the best video, the best soundbites. My angle. But then, without warning, I stopped.

Without warning, I started to feel.

I don’t remember if it was the point where a mother choked on her plea to get her money back, or the time when a grandmother sharpened her tone to get her pain understood across the room. I just suddenly remembered that, once, my own father had been in their shoes, with the same company—investing what he had on a future that he wanted for his children. I suddenly remembered the difficulty he encountered to make our dreams come true, and imagined him across the room with that kind of pain, had the future he saved for fallen on 2011 or 2012.

And then the tears slid from my eyes.

It took a while for me to process my emotions. I was trained to go out onto the battlefield with an armor so thick, I’d come back to headquarters with all the details, sans even a tinge of bias, drama, or anything remotely related to subjectivity. I wasn’t used to “feeling”, at least not on the job. I’d save that for family and friends, those close to my heart.

And it was then I realized that was the problem all along.

It was when I started to feel that I felt the real story: the pain in the truth that there are people hurting. That those accountable must, to the best of their abilities, find a way to make things as close to right as they can. That as much details must be made available as possible so that informed decisions would be made amid the raw emotions. And as I saw how pained even the officials themselves were, I saw just as clearly that with this rapport (albeit not obvious), a workable solution would in time arise.

It was when I started to feel that their stories moved me, and showed me the blessings I had once taken for granted. It was when I started to feel that I became one with my job at that moment, and my purpose for being in that place, at that time made sense.

I’d save that for family and friends, those close to my heart.

My job—my work—should be close to my heart. All too often, it hasn’t. At least not in the way it was Designed to be.

I look around my life and lives around me and realize the human race is all too prone to stoic routine—from the usual terms called “the daily grind”, the “rat race” to extreme incidences of nurses and interns laughing at the bedside of a dying man.

What a shame.

Because we were created to feel. To be immersed in where we are. To make a real difference in the lives of people around us by knowing them, relating with them, sharing with them. That goes for every single job, no matter how simple or mundane. No matter how seemingly boring and routine, if infused with passion, love, joy and respect then excellence will follow. The workplace isn’t simply a place where money is earned and tasks are accomplished, it is also a place where one learns more about his/herself, the people around them, and what value he/she can place in other people’s lives. Work is about service in its essence, and real service means we. Have. To. Feel.

Jesus, when He started healing the sick and ministering to growing crowds, never lost compassion for each and every person around Him. He could have just concentrated on healing, teaching, performing one miracle after another, but He didn’t. He was deliberately personal.

I pray that we all be deliberately personal in our work. That we never forget to feel, to love, to cherish people around us. To learn from them and allow their lives and stories to permeate our hearts and defenses. I pray compassion overflows in every person’s life each and every single day.

What a beautiful change that would be.

“When he saw the crowds, he had compassion for them, because they were harassed and helpless, like sheep without a shepherd.”

~ Matthew 9:36 (ESV)

Thanks to Tetta for processing and literally de-briefing me today (hehe) and Pam for inspiring me to write this entry!  :*

*Follow Michelle Orosa-Ople at Twitter www.twitter.com/michelleorosa