that product they call insurance

most of the people i know who said “no” when asked if they have life(or term) insurance or pension plan follows it with a “it is scary investing that kind of money to insurance companies; what if they will be gone by the time you have to claim it back?”

unfortunately, i thought of the same myself. that was the reason why i didn’t entertain insurance agents until two years ago, when i was 25. and then, i took a humble term insurance and three pension plans (which i planned to mature in my 40’s) in the last two years.

my reasons were simple; and it wasn’t about looking at insurance as investments. it was because with these plans, i will be forced to save for the annual premium. you have to remember that at that time, my savings diligence and dedication was below zero. i was spending my money before i can even earn my wage.

there were, of course, arguments as to other alternatives. there were mutual funds and UITF and the stock market, among other things. but at that stage, i was not ready for the risks associated with them.

sure, i punched some numbers before i took the plans. and yes, sure, the guaranteed returns are only around 7.5% p.a. for Manulife, and 4.0% p.a. for Sunlife (gasps!). these aren’t much compared to other investment products.

but then again, i wasn’t investing. that was also the reason why i did not consider the dividends when i was doing the calculation. i look at them as an added bonus when the maturity time comes up. i have also educate myself to treat these premiums as expenses and because they just constitute 8% of my take-home monthly salary, it didn’t hurt as much.

my insurance agent, a charming mother in her 50’s, told me over and over again, “get a plan which premium you can afford and do away with. i have seen too many clients who was so caught up with what they see upon maturity that they jump into getting expensive plans only to find themselves unable to pay for the premium years after.”

yes, i still think insurance and pension plans are worth taking interest into. but one must look at it for what it really is: an insurance. and having said so, it isn’t quite smart to put all your money there.

do not put all your eggs in one basket, they often said. if the basket breaks, you’d be in a whole lot of trouble.

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