Just to set things clear, I am neither a Financial Advisor nor a financial planner. I do not sell insurance products. But as a personal finance blogger, I feel that this is my little way of helping bridge the gap between questionable Pinoys and insurance companies that are out there for a cause.
Whether we admit it or not, people have fears toward insurance companies in the Philippines, and most of these fears are driven by ignorance and prejudice. The only way to overcome this fear is to first EDUCATE YOURSELF. And what better way to do it than to start reading the common arguments against insurance listed below.
ARGUMENTS AGAINST INSURANCE IN THE PHILIPPINES
Argument No. 1: “I don’t believe in insurance. My family and I never had insurance before and we are all fine.”
So far, you and your people have been very lucky. I know I have. Thank God! Because I was never the young professional who was eager to get insured in her early 20s. I agree that some people don’t need insurance even if they can afford it. But what I mean is that, they have a rich support system, such as a family who can provide for them in case of calamities.
This extended family structure is actually a kind of self-insurance where every member of the family has extra funds that they set aside in case accidents happen. But what if you weren’t born with a silver spoon in your mouth? What if you don’t belong to a cash-rich family? Or what if, when you are in dire need of funds to pay for hospital bills and emergencies, somehow all family members are short in cash. Or are unable to financially help you for various reasons?
Argument No. 2: “I am employed. That means my company will pay for my insurance”
I remember years ago that my insurance for being a field sales officer was around P25,000. And the minute I left the company, I had to bid goodbye to that measly P25k coverage, which thankfully, I never had to use.
But from that scenario, here are 2 things you need to realize about employee insurance:
- Normally, it doesn’t cover all your expenses
- You lose your coverage once you are no longer employed by the company. If you switch to a company with the same or better health benefits, then all is well. But here’s the problem: When you stop working or retire, you will no longer be covered. Probably by this time, it will be so much more expensive to get insurance since you are older and may have already certain illnesses.
Argument No. 3: “Insurance companies never pay. They are liars!” OR “Insurance companies cheat us!”
Some people don’t get paid by insurance companies when their spouses pass away. Unfortunately, this does happen sometimes. Let’s look at some reasons why this happens:
- The insurance company went bankrupt
Whoops! If this does happen, then you are out of luck! From a reliable source, what I know is that the government will step in to resolve the issue or the company will be bought by another insurance company that will continue to cover you while you still pay the premium. (If there is another viable solution, let me know and I’ll include it here!)
But in some cases where this buy-out does not happen, or when the government doesn’t step in, then yes, you will lose all the money that you have paid as premiums. But don’t fret, it is very unlikely for bankruptcy to happen – that is, if you have chosen an insurance company that has stood the test of time. That’s why it is so crucial to find a reputable insurance company that you are pretty sure will be around for the next 50 to 100 years.
2. Your spouse bought the wrong type of insurance
It is possible that your spouse doesn’t understand his insurance coverage. And to be brutally honest, there are some poorly-equipped financial advisors that sell the wrong product just because it has higher commissions (no pun intended).
Do note that I mentioned only “some” and in no way am I generalizing all the Financial Advisors out there. That is why it is highly recommended to do your due diligence and understand the different types of insurance and their limitations. Just so you know, there are many types of insurance and ever more variations on each one.
My Tip: DO YOUR HOMEWORK and read everything there is to know. NEVER solely rely on everything your financial advisor says. Join free forums that offer free discussions, read blogs, watch videos, and everything you can get your hands on.
COMMUNICATE the provisions and limitations of your policy to your beneficiaries so they’d know what to expect from it. And finally, be responsible and do NOT let your policy lapse by delaying your payments.
3. Your spouse stopped paying the insurance premiums, so automatically the insurance contract stops.
Need I say more?
4. You got scammed by an illegitimate Financial Advisor
To avoid this, never pay your insurance premium through your financial advisor. Always transfer it directly to the insurance company (by cash, e-wallet, or bank transfer). If not, you are at risk of getting scammed.
Argument No, 4: “With insurance, I get poor service, sub-standard meds, and less qualified doctors.”
This is not true. Insurance works according to the law of large numbers. Because insurance is a business, the insurers have the capability to make cheaper business deals with hospitals than if you, as an individual person, tries to negotiate with the hospital. Also, a reputable insurance company is able to give better medical service with lower cost to you.
Moreover, insurance companies pool large amounts of clients’ premiums, and they invest that money first somewhere else, meaning they grow the money that you paid as a premium, and then pay out your claim later when you need it.
What if you need an insurance payout right now even if your money hasn’t had time to grow?
Well, the insurance company can pay it out without any issue because they have some other clients who do not need a payout now.
Argument No. 5: Tina was so happy to find out that when she was still single in her 20s, her dad bought life insurance for her. Is this useful for Tina?
It depends. If the beneficiaries are her parents, then it means that in case something dreadful happens to Tina, her parents will receive the benefit. This is a great choice, especially if Tina is the breadwinner and is supporting her parents. If, however, her parents are financially stable and don’t need her help, then it may not be useful for Tina or her parents.
One option is to change the beneficiaries. When Tina is still single, she can place her parents as the beneficiaries, then have it switched to her children when she has a family of her own.
For the comments section:
Again, I am neither a financial advisor nor a financial planner. But I hope that by understanding these arguments against insurance, you will be more informed and be able to make a sound and intelligent decision when buying the type of insurance that is suitable for your need.
Also, to all the Financial Advisors reading this, you are welcome to share your thoughts in the comments section. Promotions will be deleted. Let’s just keep the discussion healthy and engaging!