Life Insurance in the Philippines

Today’s Guest Column is by John Miele. Thank you John for taking the time to write up this information for us.

Kicking the bucket.

Buying the farm.

Dropping dead.

Taking a dirt nap.

Checking into the oblong box hotel.

Dancing the last Tango.

Croaking….No one likes to think of their own demise, and even though it is wonderful to live in denial, we all eventually die. About a week ago, I wrote Bob and asked him a question about the Life Insurance options available in the Philippines. I had been researching the types of policies available in the Philippines and the amount of information was simply overwhelming, with many differences from the States. Please note that I am by no means an expert, but, rather, this is simply an account of what I learned from my experience.

First, a bit about my situation (Impacts premiums, your situation will, likewise) :

I am 40 years old, male, twice divorced, chain smoking, hard working in the maritime industry, much travel to developing nations on business, with plenty of hell-raising in my younger days. I earn what would be considered a “good living” in the States or Europe, but am, by no means, wealthy, with very little savings or liquid assets. My fiancé, Rebecca, is an OFW, around my age (Death penalty for revealing actual age online), based in the Middle East, and not renewing her employment contract so she can join me at my upcoming Manila posting. She has worked for many years here and her contract “gratuity” and family land in the province are her only “real” financial assets….Same situation as millions of other OFWs.

In discussing our move with Rebecca around three months ago, the topic came up about my promise to take care of her (She is, after all, leaving her job for me and the job situation in the Philippines has been much discussed in this forum.) I said something to the effect of, “Well, I have started an investment account for you and I’ll buy you a few hundred thousand dollars in life insurance.” She said, “You ARE NOT going to die!!!!” I responded, “Ummmmmm… Don’t think I’ll have much choice when the time comes.” Followed by her retort, “You are not ALLOWED to die!” What else can I say but, “Yes ma’am, you are right.”? (Two previous wives helps greatly in this regard!) All kidding aside, I quickly learned that, in her village, speaking about death is somewhat taboo, if the event has not yet occurred. I later learned that she telephoned one of the village brujas (sp?) after this conversation and asked her to make a good luck charm on me. Cultural differences again! Needless to say, thus began my life insurance search.

Wife number one, when in my early 20’s: We are young, immortal, and will never die, so no need for insurance.

Wife number two, when in my early 30’s: Both professional workers, with plenty of insurance from our respective companies… No need to buy.

What I knew about life insurance could fit in a thimble. In the States, there are two basic types of insurance: Term life insurance and Plan life insurance. What’s the difference?

Term life insurance is a policy with monthly (or annual or semi-annual) premiums for a specific period of time, usually 5, 10, or 20 years. There is normally a physical required, except on low-value policies (Think of the television commercials in the States where Art Linkletter tells you his family won’t have to worry about “final” expenses.) Premiums are normally based on the company’s risk in insuring you, hence the physical, interview questions, etc. So, if you are like me, you enter the company physician’s office, something like the typical Army physical, but more private (Not naked in front of 50 other guys when they say “Turn your head and cough”)

Doctor says:
“Tsk tsk…you are too fat.” (I say it’s marbling, making me more tender.)
“Too much smoking.” (The neglected health benefits?)
“Oh, you go to Pakistan for work? Hmmmmm…… Risky.” (Yeah, but I could get hit by a Jeepney in Manila.)
“Exercise is against your religion, huh?” (Church of the Holy Squash)
“Exercise more” (Does hanky panky with your wife count?)
“Do you drink?” (Beer is NOT alcohol… it is liquid bread, made from grain, yeast…. Healthy!)

OK, so advance to the part where they tell you how much premium you will need to pay for insurance. Essentially, the insurance company is making a bet that the future value of your premiums paid will exceed the benefit payable upon your death. This is just like Vegas… Only on a much larger scale. Insurance companies have whole floors of staff who figure out how much you are worth. Therefore, the greater risk, the greater the gamble over the long term, the higher your premiums will be. Additionally, you can be either “participating” or “non-participating” in the policy. What that means is that if you are “participating”, you can receive dividends periodically from the investment value in your premiums. You normally can either take these dividends and spend them or roll them over for future benefits. Finally, these policies usually have an array of riders available to broaden your coverage (at additional premium, of course). So, things like mortgage payments, disability, and home care can be added to your policy.

Plan life insurance is like an investment account. The policy has a death benefit, but your payments are invested into an account for you, which has cash value. Think of it as similar to a 401K plan in the States… You pay a monthly premium and the insurance company invests your money, earning a profit. Think of the death benefit as compensation for you allowing the insurance company to use your money… They are essentially paying you for the cash flow. This type of insurance is different because the benefits are largely dependent on how much money you pay. (Higher premium, higher benefits.). Medical exams are normally not required, but you may have to fill in a questionnaire. (Don’t fudge on the questions… You may not be covered if you lie.) Various riders are also normally available for this type of insurance.

What is available in the Philippines? Well, both types of plan are out there, but there are some differences.

1. The company MUST be a Philippine Corporation. So, much like a bank, even if it is an internationally recognized brand, it is a Philippine company. That being said, the “parent” company in the States, Japan, or wherever, may back the Philippine company financially.
2. Policy values are typically much lower. This is due to the big “cost of living” difference between the Philippines and most other places. I saw policies with benefits as low as 30,000 Pesos. My original estimate of a “few hundred thousand dollars” is not common, nor may it be necessary, realistically. Many people in the States are worth more dead than alive (Think giant mortgages and salaries to match, along with health care costs.). However, think if 3 or 4 million pesos with your debts covered would be sufficient. My fiancé and her family are very thrifty and, though they do not have many “things” or much wealth, they carry very little debt, unlike most Americans, unless she picks up my bad habits (More likely she’ll tame those to a certain extent). She could live out the rest of her days fairly comfortably on a few million Pesos.
3. Both Peso and US Dollar policies are available. The Dollar policies were typically more expensive.
4. Though both policy types are in the market, Plan type policies are far more prevalent.
5. The Internet makes shopping easier, but you may need to have an agent write the policy. The company may refer you to a local agent.
6. You can even make premium payments at some 7-11 stores and most banks.
7. Start on the Internet. Most of the bigger websites for Philippine insurance companies were fairly decent, if information heavy, pricing light. This is the biggest difference from the States, where you usually can even start as plan with no human interaction. There are also many US websites that shop policies for you, much like Expedia does with travel… If the Philippine companies have such sites, I couldn’t find them. Start with a Google search and shop around a bit.

So, what did I choose? Well, I really liked the plans offered by New York Life and Sony Life. They are two companies that will be around long after I am gone. I chose a small Term policy and a much larger Plan that will give her a few million Pesos plus investment account value. Cost is, in total, around 15,000 Pesos per month, but I can always increase the amount later, if our needs change. For the foreign risk from travel, covered by my company and not necessary for riders? What is right for you? That depends on your situation:

1. Age, Sex, Health? Policies are more expensive the older you are, if you are male (Remember guys, they live much longer), and health / lifestyle.
2. Are you likely to live long enough for a Plan policy to develop sufficient value?
3. Do you have children?
4. How good is your spouse with money? Rebecca is very good with money and any benefits will be put to good use. Will you be supporting siblings, other family?
5. Do you need riders and what types?
6. Do you have steady income to put into a plan or is a flat-fee premium a better deal for budget reasons?
7. How much debt are you carrying and can it be paid from the benefit?
8. Pre-existing conditions? Better check the coverage.

Hopefully, the information I presented make the task of insuring your family less stressful. I am no expert, so don’t take what I wrote as law. However, this should be enough to get you started in shopping for a plan that meets your needs.