Many Filipinos are philosophers when they talk about income replacement.
A driver may say, "Insurance? Meron na ako nun sa TODA namin. Ok na yun. Gastusin pa yan e."
A new college graduate may say. "Kailangan ba nun?"
An employee may say, "Ahente ka? Takot ako sa mga ahente e. Tsaka meron na kami niyan sa kumpanya bakit ko kailangan ng isa pa? Gastos lang yan."
It really makes me sad every time I hear those comments. Common Filipinos are really illiterate on wealth building. Sorry to say but it's true.
Insurance is a thing that you buy when you don't need it. It is not a right but rather a privilege.
I'll tell you one story. Sir Joen dela Penas, my mentor, once courted a friend to buy insurance. Almost everyday he called his friend reminding him that insurance is a great investment facility. The friend refused every time. Then suddenly the friend was hospitalized because of stroke. Luckily he survived. Upon release from the hospital he called sir Joen begging him for insurance coverage. Did sir Joen give him? Actually, NO! Because his friend is no longer insurable.
If you have one study your policy again. Do you understand it fully? Do you know how much you are covered?
Sometimes people are arrogant. (Sorry for emotional outbursts.) If you talk to them about insurance they will shrug you off and say "I have already." But when you ask them how much coverage they have, they will tell you that they don't know because it is a company benefit. They don't fully understand the terms and conditions of the policy. Others will tell, "I have 100,000 insurance coverage. I'm fine with that."
Let us analyze your income replacement. When you die you will be replaced by 100,000pesos. Teach your family to invest and put the money on an investment facility earning 10 percent each year. 10 percent of 100,000 is 10,000pesos every year income replacement. Divide it by 12 (we have 12 months in a year) then your family will receive 833.33pesos every month. This illustration is true provided that your family knows how to invest and where to invest. What if they don't? 100,000 pesos will be soon a history.
The right way
Here is how we compute income replacement or insurance coverage.
Annual income times 10.
Example, you are earning 10,000pesos per month. Your annual income is 120,000pesos. Multiply it by 10 to get the insurance coverage you need. What is the logic? The answer in the example is 1.2M. Your family should learn how to invest it in a 10 percent facility that will allow the principal to earn 120,000pesos per year. divide it by 12 and get 10,000pesos income replacement.
NOTE: 1Million coverage is leInsurance as seen by Filipinos tha 10,000 pesos per year. Just to give you an idea on the price. :)