Traditional life insurance vs VUL

[freelancebuddy]

I just met with a Philam Life agent a while ago and I'm considering the Guardian 65 plan he's offering me. Basic life insurance until mag 65 years old ako. P500,000 face amount. I'm 24 years old and according to his computation, I'm going to pay around 14,9++ per year for 5 years.

[mxherr5]

Check with Insular first, they have something similar called I-Insure.
Insular is usually cheaper. 
I guess because they're a mutual company. meaning the owners
are the policy holders themselves.

[bebeloo]

i would probably go on a term insurance na lang. just 4k a year for a 1M face amount. then invest ko na lang long-term sa stocks/MF yung matitira. probably kapag senior citizen naman na ako, my children can support themselves na. and siguro tiba-tiba na yung profit ko sa stocks/MF nun.

[sachism]

how true na hindi magadna pagsamahin ang investment at insurance sa isang plan?

i would probably go on a term insurance na lang. just 4k a year for a 1M face amount. then invest ko na lang long-term sa stocks/MF yung matitira. probably kapag senior citizen naman na ako, my children can support themselves na. and siguro tiba-tiba na yung profit ko sa stocks/MF nun.

I prefer to do this na nga din sis kesa kumuha ng another VUL.

[sachism]

i would probably go on a term insurance na lang. just 4k a year for a 1M face amount. then invest ko na lang long-term sa stocks/MF yung matitira. probably kapag senior citizen naman na ako, my children can support themselves na. and siguro tiba-tiba na yung profit ko sa stocks/MF nun.

by the way sis, anong insurance company nagoofer nito? ilang years to pay?

[bebeloo]

^Sunlife sis. namulat ang aking mga mata sa article ni Bo Sanchez.

[freelancebuddy]

^how many years to pay po?

[sachism]

can you share more info sis?

how many years to pay?
up to how old ang coverage?
purely insurance?
ano ang profile insured sa gantong amount?

Thanks!

[bebeloo]

^ (paki-correct po ako ng mga agents dito please) sisses, pag term insurance, insured ka lang for that certain year. yung 4k+ na yun isa for a year lang. then choice mo kung icocontinue mo next year, another 4k+. habang tumatanda, tumataas yun, pero hindi gaano kataasan. alam ko nga pag nasa age 60+ na ko, nasa 9k+ pa lang din ang premium if i decided to continue up to that age (up to age 90  ito, every 5 years tumataas yung premium). if di na-deads for that certain year, parang goodbye na din dun sa premium.. walang mga dividends 'to, as in pure insurance lang na 1M. you can choose your face amount pa rin ata. pero kung iisipin nyo mga sis.. given na 24k ang budget ko for insurance a year.. invest ko na lang yung 20k sa MF/stocks.. after ilang years, magkano na kaya ang gains ko dun dba. sabi nga ni Bo, baka dumating daw yung time na hindi mo na kailanganin yung insurance mo. hehe

profile: 21, F, non-smoker

i think this strategy is best for those na nagsstart pa lang magbuild ng savings nila and wala pang dependents.

namulat din ang isip ko nung sinabi ni Bo na hindi daw niya makita ang reason kung bakit may mga tao na iniinsure na yung mga babies nila agad. sino daw ba ang sinusuportahan nung baby, barbie dolls nila? hehe anyone who has read this article?

[bethantoya]

hi everyone..newbie here in fn..

hope to have lots of friends from here

[grace08]

sis meron din ako sa prulife 12k per yr 5 yrs to pay lang siya.   283k yata ang guaranteed  insured.  pero depende pa din sa income yung maging dividend tapos dami pang benefits na nakalagay.  tapos na kong magbayad last yr.  ngayon meron naman ako sa axa almost  thou ang hulog per month .  1m ang coverage.  di ko pa din siya totally maintindihan basta merong philippine wealth bond na 50% and philippine balance fund na 50%.  ang intindi ko is yung first 3 yrs ng payment almost all premium sa insurance payment mapupunta tapos after 3 yrs masmore on sa investment na .  ang nakalagay is  variable life. 

[mxherr5]

@bebe, I'm not an agent but yes, essentially you are right.
Did you check if the premiums listed in that proposals are guaranteed though?
Or is that just an indication and your premium will still be based
on the actual current rates at the time of renewal.

You might want to get a level term to age 65 instead.
I know Philam and Insular have such term products.

You're strategy is not the best for those starting up.
Its the best period according to financial gurus hehe
They also don't recommend VULs.

Btw, they say that because term insurance insurance
is soooo much cheaper than VULs. And VULs are income
tax free in the US too. But still term is more expensive.

I got Sunlife's VUL because I compared it to a
level term(meaning premium is level) to age 65
and compared how much I'd have at 10% returns
at age 65 and Sunlife came out ahead.

Most don't recommend insuring children because like
you said, insurance is primarily for income replacement.
Children don't produce income.
But some argue that with the death of a child, the parent
might want to take a breather from work...for a long time.
Insurance will take care of that.
Pay for hospitalization expenses if hospitalized.
Pay for burial expenses.

Personally, I can see getting a small amount for my future
children

[bebeloo]

Personally, i don't prefer VULs kasi parang walang assurance kung kelan ka matatapos magbayad. i don't know kung anong mangyayari saken in few years time, if i still can afford paying the premiums.  siyempre, as i grow older, magiiba din ang priorities ko, mas dadami ang gastos. ayoko namang mafeel na parang naiipit ako. yung tipong extend ng extend yung years ng pagbabayad, tapos kapag hindi ako nagcontinue magbayad ng premiums, maglalapse yung insurance ko. ayoko namang umasa sa gains na makukuha ko sa market, cause no one can predict what will happen.

Mali ba ang understanding ko about VULs mga sisses?

[health.gal]

^sis, IMO, hindi naman mali understanding mo. siguro, its better to explain it in such a way na kanya-kanya kasi tayo ng needs. pwedeng mas bagay sa lifestyle ko ang VUL at sa iyo hindi, or pwedeng the other way around, or pwedeng parehong hindi bagay sa atin ang VUL. dapat kasi custom-fit talaga sa tao eh.

[mxherr5]

@bebe,

like health gal said.. you're are essentially correct.
but what's the difference between VUL and your
plan to do Term + Stocks/MF/UITF?

You still pay term insurance until you decide that
you don't need insurance anymore right?

If you reach a point where you feel you don't
have enough money to pay for the insurance
charges then you either

A.) Let it lapse/surrender your policy

With VUL, you surrender your policy..
You get your fund value.
No more insurance charges to pay

With Term Insurance, you let it lapse
You still have your investments or
the fund value
No more insurance charges to pay.

B.) You don't pay.

With VUL, the insurance charges would
automatically be deducted from your fund value

With Term, your insurance coverage is gone.

And then you were 40 at the time and boom
you get a terminal illness and you just dropped
your insurance coverage hehe just kidding..

So really, there's no fundamental difference.

Also your point about not being able to afford
the premium when you grow old.. Isn't really
very.. well, realistic.

You have to take into consideration about
inflation. Your annual 20k premium would
be worth like 12k assuming a 5% inflation
in 10 years. In 20 years it would be like
7.5k in today's pesos.

Plus I'm also going to assume that
your salary would not stagnate and
you'll eventually earn more money when
your grow older..

I hope that made you think 

[swit_squiggle]

sobrang tagal akong nawala sa sirkulasyon. hehe

i'm with mxherr5 and healthgal. I'm not against with any of the idea being presented of any GT's here. whether VUL's or term insurance it caters various needs of different individuals. for me i prefer to choose VUL's compare to term because the benefits outweigh of buying term alone. It's a "just in case product" that in the event something may happen that you can no longer earn the same cash than your previous state, good thing that you have a fallback with this kind of product and despite the odds you are still covered as long as the policy does not lapse.

[TheGoat]

The main difference between traditional insurance and VUL is that they were tailored to suit the risk tolerance of the insurer.  Traditional are guaranteed and have lower earning power.  VUL is still insurance with higher earning power, higher risk and only the insurance part of it is guaranteed, the investment part is not.  In a way of speaking, which is better depends on the NEEDS of the insurer.  mxherr5, healthgal and swit_squiggle got it right.  If what you need is protection (money for your kids if you are taken away), go for traditional.  If what you need is some protection plus fund accumulation (future education of your kids or your retirement), then a VUL would be more appropriate.  If you only want investment but don't want to risk too much (you got some money but can't afford to loose), go Mutual Fund or UITF.  If you really want to get rich fast and not afraid to loss big (you got a more than decent amount and your income is more than sufficient), check the stock market for aggressive stocks.  If you want to be rich overnight but not afraid of going to jail (you got no money and you're desperate), go rob a bank.  Hehe.  Also, in some cases, traditional insurance offers longer insured period while VUL may be shorter.  Example, traditional insurance may cover up to age 99 while VUL only up to age 88.  So be careful with those paid-up options, you might not have enough funds to go beyond the covered age.

Term insurance is really just a temporary insurance.  The best application for it is if you are planning to travel or you simply didn't have enough money to commit to a proper insurance policy.  Take note, the key word is "commit".  Getting an insurance is a commitment, well, unless you can afford the one-time payment type.  This is because you will be regularly paying premium for 5, 10, 15, 20 years or up to your last year on earth.

A.) Let it lapse/surrender your policy

With Term Insurance, you let it lapse
You still have your investments or
the fund value
No more insurance charges to pay.

Ooops.  No fund value either.  After the term is over, you get nothing.  End of contract na yun and bye-bye premium.

Other disadvantages of a term insurance are 1.) the premium will rise according to your age.  It will come to a point wherein you'd wish you took a regular (trad or VUL) when you were younger.  2.) You will be required to be insurable before you can get a new policy (in most cases).  What if you got a terminal illness at age 30, then you will be denied.  What if at age 29 you suddenly become a professional race car driver, you will be denied.  But if you got a regular insurance today, that's only a 1 time check (in most cases) for insurability.  It doesn't matter if you got a terminal illness at age 30 or 40 or 50 or 60 or become a stuntwoman at age 55.  As long as you didn't lapse, you are covered.

[kriztina]

I just got VUL,for me mas ok yung returns niya. 20%balance bond 60%equity 20%mutual. Medyo risky yung choice ko nasa equity lahat.

[mxherr5]

@TheGoat,

Yep, what I meant was, when she'll terminate her term insurance,
she'll still have her investments.
Remember she was planning on doing VUL or Term + MF/UITF.
In this case, she'll still have her MF/UITF

Just like surrendering her VUL would mean she'll get her VUL's
cash value.

And doesn't term come with a guaranteed renewability clause?
Although I guess the insurance company can come and raise
your premium but they cannot deny your term's renewal.

@kriz

Congratz.. Just keep in mind that higher returns normally
requires bigger risks hehe
And what's a mutual?
There's bond,balance,equity and money market funds
Baka you meant money market.. they both start with m hehe

[kriztina]

^ Bond pala. my mistake.