When is the best time to get an insurance?


Before I decided to be a financial advisor I already got 2 insurance policies, at 23 years old. Best decision I ever made so far.


So if you are looking for reasons to get an insurance product while in your 20s then read on.


You might be wondering why I got two policies at once or maybe thought that I am well off that’s why I got two instantly but to tell you the truth, it’s because I am preparing for two different things and I find it more convenient if I am to get two insurance policies instantly- I did my research about it first and found out that I’ll be saving more in the long run if I got two at that time.


I’m not rich but I chose to pay my premium now while I’m able and enjoy it when I’m old.


So before anything else let’s define the importance of getting insurance.


WHY DO YOU NEED AN INSURANCE?


Basically, what you do when you buy insurance is taking out life’s risks from yourself to another entity. Some of these risks are related to accidents, death, disability, etc.


For example, the most crucial thing that can happen to a person is to die and leave their family together with hospital bills. Death and debt. If you have insurance you are taking away the risk of leaving your loved ones with debt because you’re prepared for this to happen and you already redirected the risk towards an entity, in this case insurance company, which will carry the burden that you left when you die in the form of monetary reimbursement from your policy.


Getting insurance at a young age is the best gift you can give to your future self, your family, and your future kids. If you are not young anymore, that’s okay, the best time to get insured was yesterday but the next best time is today.


As our life progresses, insurance companies also acknowledge that our needs also increase, that’s why there are so many products available to choose from.



WHY IT IS BEST TO GET A LIFE INSURANCE AT A YOUNG AGE?



Lower Premium Rate

The premium computation is based on our life’s expectancy risk and although we cannot do anything about it, what we have control over is to beat the time by getting insurance.

The younge you are, the lower the premium payment that you need to pay. If I am to get the same insurance product today that I got when I was 23 years old, the premium will not be the same. My premium now will be around Php 2,000 pesos higher than the insurance product that I got when I was 23 years old, that’s roughly around Php 20,000 in the next 10 years which is the payment duration of the product that I availed.

Imagine if I waited more time, rather than paying extra Php 2,000 per month, I can just use that as a top up or excess premium which will be used to buy more units (for my VUL insurance which is a life insurance with investment)

The longer we wait, the higher our premium will be and the only thing that we can do is beat the time by choosing to get insured now.



Higher Return

Why, is the computation for the return of investment used for older people different from the younger ones? The answer is no. The reason why the return is higher for people who get an insurance product at a younger age is due to the fact that the money of their policy will be parked longer for more gains.


In order for the insurance companies to gain and sustain their client’s policies, they used the pool money and invested it in the stock market.


In my case my VUL’s maturity is at age 88, so if I am to reap from it I am expecting a return of investment for the duration of my money being parked which is 65 years. For comparison, if I decided to invest at age 35 years old I’m only expecting a return of investment worth 53 years.


To give you a rough estimate, if a 23 year old female and non-smoker gets life insurance with  investment (VUL) worth 1,000,000 life coverage (face amount of 500K) with a projected 8% return she will get a 15.6M at age 88.


While if you are a 35 year old female, non-smoker with the same life coverage, face amount, and projected return investment rate you will get a 6.2M at age 88.


Again, there’s nothing wrong if you are now beyond your 20s and just considering insurance. What matters the most is that you start now.


The longer the time frame of your money being parked, the higher the return.



Starting early means finishing early

For the insurance product that I got, both products have a paying period of just 10 years. So that means that in 10 years time I’ll be done paying for it, at age 33 I’m already secure up to age 100 years old (coverage of the other insurance product that  I got which is a traditional product focused on health)


If God permits, I’ll be able to retire early- which is THE goal.


This is very ideal for everyone, especially those who are single and just starting out. While you don’t have that many responsibilities, it is best to start now. In your 30s most people are starting a family and that includes managing finances for their home rentals, mortgages, payment for vehicles, and of course raising a child.


So to manage all your finances it is best to hustle now and then relax in the future.


This is a 3-part adulting series where we tackle insurance in your 20s. The next part is Factors to consider in getting your first life insurance.