Financial IQ: Is Pacquiao insurable?

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Financial IQ Philippines Quick Hit(s):

Yes, Pacquiao is insurable.


Can Pacquiao be insured? Can an unmarried couple jointly buy property & life insurance?


My boyfriend is a big fan of Manny Pacquiao and I’m just curious if big firms like Insular Life insure athletes like Pacquiao who are into violent sports like boxing. I’ve read of boxers dying in other countries. Another question: My boyfriend and I plan to jointly buy a house with our savings plus some money from our parents, but we are not yet married. Can we legally buy and jointly own property, and can we also buy life insurance with each other as beneficiary though we are not yet married?


Karla B. Villagracia, 25 years old, housewife, General Santos City, South Cotabato


Answer 1


Athletes are generally acceptable for life insurance but are usually not allowed disability cover. Even athletes who are engaged in aggressive, violent sports involving physical contact like Manny Pacquiao, who is a professional boxer, may be covered for life insurance. However, premiums will be higher to reflect the higher mortality risks, not only during his professional career, but even in later years due to brain damage. 


Answer 2


Buying a property prior to your marriage from your respective savings may be legally done.  Your relationship under such an arrangement shall be governed by the provisions of our Civil Code on co-ownership.  With respect to life insurance, either of you may secure life insurance on your respective lives. Based on our Insurance Code, you as insured/owner may designate any beneficiaries to your life insurance policy, provided that they are not disqualified by law.  Those disqualified by law are those persons who are prohibited by law from receiving donations from the insured, as provided under Article 739 of the Civil Code of the Philippines.  However, such beneficiary designations may be subject to the internal rules and regulations of insurance companies in accordance with their respective underwriting policies.  It may also be worth considering that the designation of the beneficiary be initially made as “revocable” to provide the insured/owner with the necessary flexibility in adding or changing beneficiary/ies, just in case he/she deems it necessary or proper.  Anyway, the revocable designation can be made irrevocable in the future at the discretion of the insured/owner. The choice of revocable or irrevocable beneficiary designation is important in determining the estate tax implications of the insurance proceeds.  We suggest that a professional life insurance agent or financial advisor be consulted on this and other life insurance matters for proper guidance.

http://www.philstar.com/Article.aspx?articleId=642785&publicationSubCategoryId=82

Financial IQ: Philippine economy in 2011

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Financial IQ Philippines Quick Hit(s):

It seems like Philippine economy remains positive in 2011.


Forecast for Philippine economy in 2011


Since Insular Life is a financial giant with 100 years of solid history, can their big bosses please share their prognoses and expectations for 2011 for the Philippine economy? Any advice for small entrepreneurs and even for ordinary employees in 2011?


Ulysses Huang Lim, 42 years old, businessman, Makati City


Answer


Philippine economic fundamentals are expected to remain very positive in 2011. Some points worth noting are: the country’s Gross International Reserves at an all-time-high level (+$60B); this may lead to a very likely credit upgrade for the country, which may result in the further lowering of the government’s financing costs. This in turn may keep the current low-interest environment where it is at present. Entrepreneurs may want to use this opportunity to secure some financing for the purpose of expanding their businesses while ordinary employees can participate in the anticipated upbeat business prospects by buying into the shares of listed companies involved in consumer goods and services.

http://www.philstar.com/Article.aspx?articleId=642785&publicationSubCategoryId=82

Financial IQ: On investing stocks...

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Financial IQ Philippines Quick Hit(s):

Citeseconline provides free seminars on stocks.  Both equities and Mutual funds are good, as long as you are risk tolerant.


How to better invest in stocks? Are investment funds ok?


As a busy person who has no time to monitor the stock markets on a daily basis, is it better for an investor to just entrust our funds to an investment fund? Is this risky or less risky? After reading the answers of Insular Life to your readers’ questions, I researched their website and am curious about what I read in “Investment Funds of Insular Life Wealth Series.” Can you share more details, but more in laymen’s language instead of using stock market or finance jargon? Can ordinary people invest there and what minimum amounts are required?


Richard Toledo III, 38 years old, businessman, Cebu


Answer


Investing in the stock market is not as complicated as popular perception; you may want to look at buying shares as if you are going into business. For example, if I bought/invested in the shares of a successful neighborhood grocery, my investment returns would be a direct result of how the business performs from hereon. If it continues to do very well, then the value of my investment would grow just the same. The opposite happens if the business falls on hard times.


After you have decided to invest a portion of your funds in the stock market, your next decision point would be to decide whether you want to do this personally or just entrust the selection/management to an institution by way of investing in any of the investment funds being offered.

http://www.philstar.com/Article.aspx?articleId=642785&publicationSubCategoryId=82

Financial IQ: Too much life insurance?

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Financial IQ Philippines Quick Hit(s):

No, it is not.  Aside from protection, it also serves as wealth preservation.


Is it bad to buy too much life insurance?

I am a widow. Do you think it’s a bad idea to buy too much life insurance for heirs who will not be poor anyway — is there such a thing as too much or excess life insurance? Warren Buffett seems to think that bequeathing too much money to heirs is not good. Do you agree with that? I don’t have problem kids, but can parents legally disown a disobedient kid from his inheritance under Philippine law?


Elaine Crisanto-Ramirez, businesswoman, Alabang, Muntinlupa


Answer 1


Life insurance is meant to indemnify loved ones, creditors or those with a financial interest in the insured for the economic loss they would incur when he passes away.  There is also a general principle in insurance risk management that a person cannot unduly or excessively benefit from the said loss.  Hence, it is possible to have cases of “over-insurance” when the amount of coverage is grossly disproportionate to the value of the actual financial loss.  It is also for this reason that insurance companies do financial underwriting; that is, they assess the reasonableness of the amount of insurance being applied for vis-à-vis the financial needs of the intended beneficiaries.  For example, if someone wants to buy life insurance in order to ensure a continuing monthly income for his family for a period of five years, assuming the current monthly expenses of that family are, say, P100,000 and adjusting for annual inflation of five percent, the amount of coverage needed would be approximately P6.6 million.  That amount would be understandable and reasonable, but if that person applies for P20 million for the same purpose, that would be considered excessive from a financial risk perspective.  Getting life insurance for one’s heirs ultimately depends on one’s purposes.  For instance, they may inherit properties that would make them wealthy, but they might still need some amount of inherited cash for their usual needs or to start a business so they could be financially independent.  I hope I have answered your questions with these examples 


Answer 2


I believe the amount of inheritance or the proportion of the estate one would want to give to his/her heirs depends on a lot of factors that the said owner of the estate considers to be important (e.g. support or education of the heir, philanthropic or charitable activities, etc.).  But of course, any estate owner would want that whatever he/she gives to his/her heirs would not be wasted but put to good use.  If the inheritance will only serve to spoil the heir, then it might not be a good idea to bequeath too much of it to this heir or grantee.


In relation to your next question about disinheritance, our law on succession gives parents the right to disinherit any of their children and descendants but based on grounds expressly stated by law and only in accordance with prescribed procedures.  Article 919 of the Civil Code of the Philippines enumerates the sufficient causes for the disinheritance of children and descendants, legitimate as well as illegitimate.  Examples of these are (1) “When a child is found guilty of an attempt on the life of the testator, his or her spouse, descendants, ascendants”; (2) “When the child or descendants has been found guilty of the adultery or concubinage with the spouse of the testator”; (3) “Maltreatment of the testator by word or deed, by the child or descendant”; (4) “When a child or descendant leads a dishonorable or disgraceful life”; etc. There are other provisions of the Civil Code that provide for the specific legal requisites for a valid disinheritance. These legal requirements on disinheritance are strict due to the fact that this is the only exception to the rule that compulsory heirs cannot be deprived of the legitime.  Thus, as in other legal matters, we suggest that a lawyer be consulted for the appropriate legal guidance. 

http://www.philstar.com/Article.aspx?articleId=642785&publicationSubCategoryId=82

Financial IQ: Lea Salonga on saving

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Financial IQ Philippines Quick Hit(s):

Good to hear Lea Salonga's money habits.


Multi-awarded international singer Lea Salonga agrees with our advocacy to promote savings as a national habit. She recently released a beautiful new album, “Lea Salonga… Your Songs” with Sony Music, and she shared with us her thoughts on money: “I save money. Even when I was a kid already earning, I tried to save; everything went to the bank. I’m really barat. I have clothes that are already 10 years in my closet and I still wear them. Yes, I encourage everyone to save money regularly for a better future. Don’t be too materialistic, don’t follow others. I also believe in life insurance, medical insurance, car insurance and travel insurance. I believe every person needs to have some kind of life insurance for protection.”

http://www.philstar.com/Article.aspx?articleId=642785&publicationSubCategoryId=82

Financial IQ: Tessie Sy Coson's tips for success

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Financial IQ Philippines Quick Hit(s):

Great advice from a tycoon's daughter.


BDO boss Teresita “Tessie” Sy-Coson — the eldest child of SM founder Henry Sy Sr. and widow of the late ethnic Chinese lumber tycoon Louie Coson — told me that she was 13 years old when her father trained her to work in the family business. When asked whether she worked during the Christmas and summer holidays, she said it included weekends the whole year. Does she have any success advice for this New Year? Philippine STAR reader Sy-Coson said: “Just be optimistic, energetic and be ready for opportunities that one should grab when they come. For entrepreneurs, think of an innovative idea that’s relevant and beneficial to the consumers.”

http://www.philstar.com/Article.aspx?articleId=640798&publicationSubCategoryId=82

Financial IQ: Life insurance as inheritance?

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Financial IQ Philippines Quick Hit(s):

Life insurance can be one way to preserve inheritance.  Irrevocable beneficiaries are 100% non-taxable.


As an inheritance, is life insurance better than realty assets?


I read your columns. I strongly support your advocacy with Philippine STAR and Insular Life to promote more public awareness on the importance of life insurance, because I have heard of kids whose parents died without life insurance and they had to transfer from private schools to public schools. Personally, do you also agree that passing on life insurance in terms of cash received by beneficiaries is a better inheritance than passing on real estate properties to kids and grandkids? Personally, I’ve encountered various headaches inheriting real estate, from possible squatters to legal headaches. Can life insurers in the Philippines also better educate their agents? Because one problem I see is that many agents never bother to tell clients that the dividends are not guaranteed. Lots of clients are angry when their payment periods are extended beyond what agents promised, due to changing dividends. Please explain the details of this.


J. Simoun Araneta Balboa, businessman


Answer


Most of us want to leave our worldly belongings to our families so they may continue enjoying the lifestyle they are accustomed to.  My father, who is a lawyer, occasionally handled legal disputes involving inheritances.  It is so tragic to see a family fighting over the disposition of real property and other similar assets because each heir wants to have the choicest picks.  On the other hand, if the inheritance consisted solely of cash, its distribution would be so much simpler and less subject to disputes provided each heir gets a commensurate/equitable share.  This is why there are those who acquire life insurance for this purpose, preferring to incorporate their other real properties so these can continue to be enjoyed by their families without their having to fight over who owns what.  I can only tell you that I would favor this approach, but I cannot presume to speak for other people. 


As for educating our agents better, we are certainly in agreement with you.  However, even if we exert our best efforts to professionally train our salespeople, there could still be instances when some of them inadvertently or deliberately err.  We would appreciate receiving feedback from clients on the conduct of our agents so we can correct or resolve whatever deficiency in learning there might still be. 

http://www.philstar.com/Article.aspx?articleId=640798&publicationSubCategoryId=82

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• Why Your Will Should Name Designated Beneficiaries (blogs.forbes.com)
• Is there such a thing as an "international life insurance"? (ask.metafilter.com)

Financial IQ: T-Bills/Bonds as Investments?

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Financial IQ Philippines Quick Hit(s):

Risks are inherent on these investment instruments, not just stocks or Equity Mutual Funds.  Treasury bills (T-bills) and Bonds are backed and with guaranteed interest.  Contrary to majority, risks are still present on these instruments when bank interest goes up... demand for T-bills and bonds would go down.


How are t-bills, stocks, bonds & managed funds for investments?


Your columns are interesting. I’m in marketing work with a pharmaceutical firm. I appreciate your informative series on life insurance and savings, but since you said we readers could ask personal finance questions, could you ask Insular Life if they also sell bonds or have mutual funds? Is it a good time for people to invest their income in Philippine stocks now? What about T-bills? Kindly explain these options and help assess them.


Sonny Go, Jr., 31 years old, single, Pfizer


Answer


As somebody involved in the pharmaceutical industry, I am sure you are aware of the medical profession’s ethical code of not prescribing any medication/treatment without the proper diagnosis. The practice of financial advisory also adheres to the same standard; to answer your question as to where would be the best investment option today, it would be essential to first articulate your financial goals in terms of 1) how much is required to fulfill it and 2) when these goals would happen. Your answer to these two questions would provide you with a general guideline as to which option is most appropriate in helping you achieve your financial goals. 


For goals that are five years or less, your best option would still be the bank products that we are all very familiar with like time deposits and special savings. For financial goals that are at least five years into the future but less than 10 years, you may want to consider a managed fund that invests in T-bills/bonds (Insular Life’s peso or dollar Fixed Income Fund). For 10 to 15-year goals a balanced fund may be your best choice (Insular Life’s Balanced Fund). And for financial goals that are at least 15 years into the future, an equity fund (Insular Life’s Equity Fund) should be the most appropriate.


Is it a good time to invest in the stock market? My answer: Every day is a great day to invest for as long as you are investing to fund an articulated financial goal.

http://www.philstar.com/Article.aspx?articleId=640798&publicationSubCategoryId=82

Related articles

• Mutual Funds Vs Individual Stocks (debtsettlementevents.wordpress.com)
• Investors bailed out of bonds in November, mostly municipals (usatoday.com)

Financial IQ: Insurance for children?

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Financial IQ Philippines Quick Hit(s):

Insurance is used as protection of loss of income.  Hence, it makes more sense to insure adults than children/students.


How to buy insurance for preschool teachers & students?


I admire your columns. I would like to ask if you have any ideas on the rules and regulations for opening a head-start/toddler school. Who/where can we get info on opening such a school? Is it advisable also to get insurance for such a business since it deals with small kids?


Andy Ong, 41 years old, bakery owner, married with two kids, Aurora Boulevard, San Juan


Answer


In line with your plans of opening a toddler school, we know that you would want the best for your future students and faculty members.  Aside from their educational and moral development, the protection of their well-being would be topmost among your concerns. 


We are pleased to announce the availability of our Students and Teachers Plan. This plan is designed to provide students and teachers the utmost protection from life’s contingencies. 


The Students and Teachers Prototype Plan is designed to give them 24-hour medical coverage for a Life and Accidental Death and Dismemberment (AD&D) Rider and medical benefits for accidental injuries.  All DECS-accredited private schools, colleges, and universities are qualified.  To give an overview on the general provisions of the plan:


Eligibility


• All bona-fide students officially enrolled from 2 to 40 years old; coverage shall automatically terminate at age 41.


• Full-time teachers/faculty members and administrative staff with permanent status who are at least 18 to 59 years old; coverage shall automatically terminate at age 60 or upon resignation/retirement, whichever comes first. Participation


• 100 percent of the number of eligible students but not less than 50 students for schools and universities


• All eligible teachers/faculty members and administrative staff.

http://www.philstar.com/Article.aspx?articleId=640798&publicationSubCategoryId=82

Financial IQ: Is a diabetic insurable?

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Financial IQ Philippines Quick Hit(s):

Diabetics can be insured.  Insurance premiums may be higher to compensate for the higher risk due to ailment.


Can diabetics be insured? what other medical conditions are uninsurable?


Is it true that a person with a serious diabetes ailment can no longer get life insurance? My father has diabetes and I’m thinking of encouraging him and my mother to buy life insurance similar to my own case and that of my husband. Can you ask Insular Life what are other medical cases or problems make a person uninsurable? Can a sick person still be insured as long as he or she is willing to pay higher premium costs?  


Monica B. Gutierrez, 29 years old, housewife, bank officer, Cebu


Answer


A person with diabetes may be insured if the blood sugar is well controlled, and there are no additional significant complicating risk factors from the resulting accelerated vascular disease of diabetes, such as heart disease, stroke or renal impairment. A diabetic, if insurable, will have to pay a higher premium commensurate to the additional risks. On the other hand, if a diabetic’s application for insurance is not acceptable for medically-underwritten types of insurance products, he may opt to apply for insurance products that cover applicants without need for screening or medical evaluation.

Multiple medical impairments, marked obesity, malignancies that are not in remission, autoimmune diseases that are active, and Alzheimer’s disease are some of the illnesses that are not acceptable for coverage. For children, those with pervasive developmental disorders, or congenital diseases that complicate other organ systems and have not been corrected or repaired, may not be acceptable.

http://www.philstar.com/Article.aspx?articleId=640798&publicationSubCategoryId=82

Related articles

• Diabetes Is Not Necessarily A Decline For Health Insurance (theinsurancebarn.wordpress.com)

Financial IQ: What is Tithing?

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Financial IQ Philippines Quick Hit(s):

Tithing is donation to church and charities.  Kudos to everyone who practices tithing.


Dawn Zulueta-Lagmadeo, who incidentally traces her maternal ancestral roots to Bethlehem in Israel, told this writer that she agrees with our advocacy to encourage saving money as a national habit in the Philippines. Dawn said that even while she was starting out as a model and, later, a young actress, she had learned to always save money in bank deposits, treasury, as well as later investing in realty properties and also jewelry.


Dawn added: “I believe in the importance of life insurance. It’s like stashing away money and forgetting about it until — God forbid — something happens and it will help our loved ones. I am so segurista. I encourage people to buy life insurance and to choose only reputable big companies. It is also good for those who live too long and if we’re old and not always productive … I usually also set aside 10 percent of my income for charities and for doing God’s work.”


This practice of Dawn’s and other Christians setting aside 10 percent of their income to donate to the church and charities is called tithing, and is based on Bible principles. 

http://www.philstar.com/Article.aspx?articleId=640798&publicationSubCategoryId=82

Financial IQ: Life insurance for businesswomen and businessmen?

Financial IQ Philippines Quick Hit(s):

Whole life insurance is good.  You may also want to get additional 10-year or 20-year term (to save on premium cost) and invest the difference to an Equity mutual fund.


What is the best life insurance for businesspeople with kids?


My husband and I are fans of your column in The Philippine STAR; we also support your advocacy to promote savings as a national habit. Do you think bank interest rates will go down this New Year? Should a medium-sized business take more loans or still be conservative? What is the best life insurance product for a businesswoman and my businessman husband with two young kids, should the size of our policies cover also the size of our existing business loan?


Dina de Mesa, 36 years old, businesswoman, Iloilo


Answer


Thank you, Dina, for your question.  In answering, it’s most ideal that I be given additional information on your existing financial plan.  In the absence of this information, however, I will make a few suggestions that are generally applicable to most people in your situation.  As a couple with two young kids, your family is susceptible to the risk of losing one or both breadwinners.  Your children are fully dependent on you. As such, their interests are best served if both you and your husband have individual life insurance policies to make sure they are provided for in any unforeseen event.  If you have already secured such protection, you will be best advised to secure an insurance endowment plan, which can provide your children the funds for their college education. 


As for your question about if the size of your policies should also cover your business loans, it depends on the terms of the loan you applied for.  Normally, banks will offer term insurance that matches your business loan repayment period.  This temporary cover expires when you have fully paid up your loan, enabling you to get just the right amount of insurance for the limited period you need it.  There are a number of insurance products in the market today that will suit your individual requirements.  

http://www.philstar.com/Article.aspx?articleId=638619&publicationSubCategoryId=82

Related articles

• Life insurance: Price vs quality (confused.com)
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Financial IQ: Insurance for Stewardesses

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Financial IQ Philippines Quick Hit(s):

There is a possibility that insurance premium may be slightly higher.


What is the best policy for airline stewardesses who often fly overseas?


What do you recommend as the best life insurance for an airline stewardess who often flies abroad? Are the costs higher because of the nature of a person’s work, or are life insurance costs the same based on the age bracket? The Philippine Star and Insular Life should be congratulated for helping promote financial education of the public through your column’s Question & Answer series.


Josie Martinez, 26 years old, Santa Rosa, Laguna


Answer


An insurance agent will be able to help her determine the best coverage for her depending on her present needs and purpose. Just like any regular employee, a stewardess can apply for insurance at standard rates. However, if she is based in a country that is considered high-risk, premium will be higher. For accident or disability cover, additional premiums will also be applicable. 

http://www.philstar.com/Article.aspx?articleId=638619&publicationSubCategoryId=82

Financial IQ: Can god parents buy life insurance?

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Financial IQ Philippines Quick Hit(s):

Anyone can purchase life insurance for anyone (including god children, etc).


Is it okay to give life insurance as Christmas gifts to godchildren? My husband and I have many godchildren, and since I read your Question & Answer series on savings and life insurance, I’m curious to ask if godparents can buy and give life insurance as gifts but pay only the premium for the first year and then their parents pay the following years? Is this unusual, allowed or not?


Irene Ong-Cheng, 47 years old, businesswoman, Zamboanga


Answer


Yes, godparents can surely pay for the initial premiums of an insurance policy as a gift to his/her god child.  The god child may be the person insured under an insurance policy that provides for benefits during his/her lifetime such as periodic monetary benefits (which are usually called “living benefits” that may be used for the child’s particular needs such as education).  His/her parents may be the designated beneficiary/ies in the policy.  Alternatively, the child can be the beneficiary in a life insurance policy on the life of either of his/her parent.  In either case, since the succeeding premiums are to be paid by the parent upon his/her approval, then the said parent shall be the Applicant-Owner of the insurance policy who shall be entitled to specific rights including, among others, the right to receive “living benefits.”


You may also consider securing a One-Pay Life Insurance Policy which requires only a single premium payment.

http://www.philstar.com/Article.aspx?articleId=636460&publicationSubCategoryId=82

Financial IQ: Is playing lotto okay?

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Financial IQ Philippines Quick Hit(s):

Lotto betting is okay.  Though chances of winning is like getting struck by lightning twice... :)


Is playing the lotto okay or not? How should someone invest P730 million in lotto winnings? I appreciate your columns about saving money and hard work to get rich, but I think the majority of people in our society still prefer faster ways to get rich like playing the lotto, with a record prize money of P730 million. My questions: Is it okay to try government-sanctioned games of chance like the lotto? Is it credible or possibly tainted by fraud, too? Are you yourself buying lotto tickets? Should middle-class people like me buy lotto chances also and continue to hope? Last question: just in case I win the lotto prize of P730 million, where would you recommend that I invest that money (please share several options) and how much should I be free to spend?


Angela Paz Rosario, 37 years old, housewife, part-time entrepreneur, Cavite


Answer


Personally, I think there is nothing wrong with people playing the lotto and hoping to become overnight zillionaires for as long as they realize that the probability of them winning is one in 29 million — this is about the same probability as a person being hit by lightning twice standing exactly on the same spot, as my mentor Rex Ma. A. Mendoza used to say.


To answer your question on how to invest P730 million, please allow me to walk you through the dynamics of investing:


Investment result is usually a function of three components: 1) the amount of money invested; 2) the time the money is invested; and 3) the rate of return. The challenge is to find the ideal combination of all three to achieve the investment result that we desire. For example, if I am aiming for P1 million to fund a child college education seven years from now, to accomplish this, I need to invest 1) P9,967.24 per month; 2) do this religiously for seven years; and 3) earn no less than 5% net per year.


Winning a P730 million bonanza will give you the luxury of completely ignoring the last two components (time invested and rate of return); placing that amount in an ordinary time deposit earning 2% per year will already give you P14.6 million a year or about P1.2 million/month, enough for a very comfortable lifestyle for most people.

http://www.philstar.com/Article.aspx?articleId=636460&publicationSubCategoryId=82

Financial IQ: Can OFWs purchase life insurance?

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Financial IQ Philippines Quick Hit(s):

Yes, but OFW has to return to Philippines (even only while he/she is transacting the insurance) if he/she wants to buy life insurance in Philippines.


Can OFWs avail of life insurance protection? How? My two uncles are overseas Filipino workers and a cousin is a seaman. Are there special requirements for OFWs to buy life insurance and health insurance depending on what countries they’re based in or the nature of their work, etc.? I hope to become an engineer and also work abroad because our government leaders do not create the environment for a good economy here so hardworking people need to work overseas.- I suggest that since a lot of people read The Philippine Star, you write in your column to ask the government and life insurers to give special discounted insurance plans for OFWs. How can OFWs abroad buy life insurance from Philippine companies? Do they have agents overseas?


Renato M. Mendoza, 17 years old, student, Mandaluyong City


Answer


The good news is the Philippine government, by virtue of Republic Act 10022, Section 23, requires recruitment and manning agencies provide insurance coverage for each worker whom they deploy overseas. Included in this compulsory insurance coverage are: life insurance for natural and accidental death, total permanent disability as well as non-life insurance that covers repatriation cost, subsistence allowance benefit, compassionate visit, medical repatriation and medical evaluation. This is a good starting point for workers who are venturing overseas for the first time.


As for your personal life and career progress, you have to continuously assess your financial needs and plan accordingly. Life insurance agents can work with you in developing and implementing your financial plan.


Generally, life insurance companies and their agents can only do business in the country where they are licensed to operate. Further, our insurance law requires that a person buying life insurance must sign the application form in the presence of his/her agent. Therefore, the best time for an OFW to purchase an insurance policy from a Philippines-based company is while he/she is here, during vacation or training.


The country and nature of work are important considerations in life insurance. Premium rates (cost of insurance) vary according to the risk associated with one’s occupation. An office employee, for instance, pays less for the same type of insurance, than a construction worker. In terms of workplace, insurance companies usually refer to POEA advisories on travel bans and apply the same restrictions to life insurance applications.

http://www.philstar.com/Article.aspx?articleId=636460&publicationSubCategoryId=82

Financial IQ: Pacquiao on how to improve Philippine Economy

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Financial IQ Philippines Quick Hit(s):

Maybe boxers can be better than actors/actresses in politics. :)


BDO Universal Bank Chairman Teresita “Tessie” Sy-Coson remarked upon seeing the popular boxer Manny Pacquiao wearing a dark suit and tie: “I’m not used to seeing Pacquiao wearing a suit. He’s very popular.”


My questions for Pacquiao weren’t about the possibility of his boxing fights against elusive British champion Floyd Mayweather, Jr. or Mexican champion Juan Manuel Marquez, but about the most important fight of the Philippines: against massive poverty and underdevelopment and economic issues. I had to clarify that those weren’t trick questions, since I saw Pacquiao’s handler or assistant seated beside him looking surprised when I asked in Tagalog: “Congressman Pacquiao, what are your suggestions that we should focus on or reforms needed to improve the Philippine economy?”


Manny Pacquiao looked a bit surprised and paused to think for a while, then replied, also in Tagalog: “We should invite more people to come to the Philippines, and I’m willing to help there.”


This writer asked Pacman to clarify: “Are you referring to the need to welcome more tourists or foreign investors?”


Congressman Pacquiao smiled: “Yes, that’s what I meant, we really need to have more foreign tourists and foreign investors come to the Philippines.”


My follow-up question was: “What should we do or what reforms are needed for the Philippines to woo more foreign investors?” Before Congressman Pacquiao was able to answer, his somber-looking handler said he had to make a cell phone call and handed him a mobile phone which ended my exclusive interview as seemingly a hundred cameras clicked away at us. You have to give it to Manny Pacquiao: he hit the bull’s eye with his simple yet direct reply — yes, the way to modernize the Philippine economy and accelerate progress is to find ways to attract more tourists and investors.

http://www.philstar.com/Article.aspx?articleId=636460&publicationSubCategoryId=82

Financial IQ: How much should we save?

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Financial IQ Philippines Quick Hit(s):

Savings is a habit.  Once it becomes a habit, increase the amount of savings as you go.


How much money should a new credit card user save?


Your columns about money issues are thought-provoking. I’m a new credit card user and it’s so much fun to be able to spend even before my salary comes. I often also just pay the minimum required plus the interest. In your columns, you keep advising that saving money should be promoted in the Philippines. Can you quantify that with specifics like how much savings we should aim for in order to be safe?


On life insurance, I am still very young. Who should be my beneficiary and can I change that to my future kids when I eventually get married?


Nathaniel K. Velasco, 27 years old, Dumaguete City


Answer


Thank you for your interest in insurance, Nathaniel.  Being young should not deter you from acquiring life insurance; in fact, it should be an advantage because of the much lower premiums for younger ages.  In my particular case, I realized the necessity and beauty of life insurance in my early 20s when I first started working.  At that time my income was not enough to acquire properties or other material assets, so I decided to prioritize savings and insurance coverage.


Even if I wasn’t married then, my principal reasons for getting life insurance were (1) to preserve my financial independence (for example, if I get hospitalized I would have money to pay my medical costs and not have to rely on my parents to finance me), (2) to strengthen my desire to set aside money for the future — my bank savings account represented my liquidity savings while my insurance policies represented my forced savings, (3) to begin accumulating wealth by acquiring an asset I could afford — life insurance, and (4) in case something fatal would happen to me I could contribute to the future welfare of my parents or siblings.


The last reason also answers your question — you can initially designate your parents or siblings as your revocable beneficiaries and later make a beneficiary change to your fiancée, wife or children, which life insurance companies allow, when the appropriate time comes.

http://www.philstar.com/Article.aspx?articleId=632156&publicationSubCategoryId=82

Financial IQ: Why save money instead of enjoying life?

Financial IQ Philippines Quick Hit(s):

It is called planning for the future... :)


Why save money instead of enjoying life?


Why should we save so much money? Isn’t it better that we enjoy our lives since life is short and let the future generations work for their own money? We have a saying: hindi mo madadala yung pera after death di ba? Life insurance is also good for emergencies or tragedies, but if a family has more than enough to tide them over, maybe life insurance is not a necessity for some families?


Daphne Figueroa, 23 years old, call center agent, Quezon City


Answer


Daphne, there are many views to life and one such view is “to eat, drink and be merry.”  I agree with you that life should be enjoyed and it is precisely for this reason why I believe you need to secure it with life insurance.  Life is full of uncertainties and we are exposed to real risks every day.  These risks come in the form of accidents that may leave debilitating effects on our lives; or the risk of dying too soon, well before we set our children off in life or maybe the risk of outliving our fortunes in our old age. 


If we do not neutralize these risks, we may not enjoy life at all.  Through life insurance, we can “transfer” these risks to financially sound institutions that, for a fraction of the cost, will be willing to mitigate a portion of the risk we may be exposed to.   This being said, it does not matter therefore if you are financially well off or not — we face the same uncertainties and risks.  In fact, when someone has more to protect, there is more reason to secure it with insurance. 

http://www.philstar.com/Article.aspx?articleId=632156&publicationSubCategoryId=82

Financial IQ: How to save money with high cost of living?

Image by neilalderney123 via Flickr
Financial IQ Philippines Quick Hit(s):

We just need to shift our money management ways.  We need to set aside a fix savings amount per period regardless of our projected expenses.


How do you save money with the high cost of living?


Your columns on personal money questions are relevant and interesting, especially your advocacy for people to save money. I agree with you about saving money, but it is easier said than done in our society where the costs of living are so high like electricity, transportation, food costs, housing, education, medical and others. I think even life insurance is more costly here than in other countries, because my sister in New York told me that their life insurance there is cheaper. Why? How can we save?


Patricia J. Pastrana, 32 years old, businesswoman, Makati City


Answer


During one annual employee recognition program of my former company, I will never forget what one of our co-workers said when she spoke on behalf of the awardees.  She was receiving a salary just above minimum wage, but she told everyone that no matter how little one earns, one can still make ends meet.  I take inspiration from her words because while it is true that today’s higher living expenses pose an even greater challenge to saving money, we can still set aside part of what we earn if we are determined enough to do so. 


We can exercise our power of choice to decide on what we truly need to spend for.  Moreover, the other side of this higher-cost-of-living reality is that businesses compete more fiercely for a share of our income and this often results in their offering discounts and promos to lessen the cost of their products/services (like budget airfares, for example).  In order to save more effectively, make a paradigm shift. 


Most Filipinos spend first, then save what is left of their salary before the next payday.  This does not work most of the time.  What does work is to save first, then spend what is left.  For example, if you regularly deduct 10 percent  or more from your salary each time you are paid and immediately put it into your savings account, you will eventually develop the discipline of prioritizing your savings before any expense as well as adjust your spending habits to make the remaining 90 percent of your income fit your needs.  My wife does this for our house help, and you will be amazed at how much they have been able to save!


As for life insurance in the Philippines costing more than in other countries, if indeed it is so, it would be because (1) the more developed countries have a greater percentage of their population insured and can thus spread the cost of insurance to more people, (2) the tax treatment in other countries is much lighter for life insurance policies and this leads to lower premiums, (3) quality of life insofar as health services and overall safety standards is better, which then promotes longevity and lowers risk-management costs, and (4) stronger insurance penetration leads to a greater variety of insurance products available, which cater to a wide range of affordability.  As our country’s economy improves and more Filipinos are enlightened about insuring themselves, we are confident we can eventually achieve parity with these nations, but don’t let it stop you from insuring locally today.  

http://www.philstar.com/Article.aspx?articleId=632156&publicationSubCategoryId=82

Financial IQ: On investing by ourselves...

Financial IQ Philippines Quick Hit(s):

In order to rely on ourselves in investing, we need to learn the basics of that investment instrument.


Is it better to invest money ourselves or rely on hedge funds, etc.?


Many of us in Cebu read your column and Philippine STAR. My question: is it better that we personally study and invest our money, or should we rely on hedge funds or other entities to invest our money even if we don’t know about them? On insurance, my family is a victim of CAP; we lost money on two pre-need education plans we bought. What happened to this case? I believe in your advocacy of promoting life insurance with Insular Life and Philippine STAR, because our father died in 2001 of a heart attack at 60 years old, and the life insurance money we got helped our mother with funeral expenses and expanding our family businesses. 


Catherine Salimbangon, 26 years old, married, president of Organique Acai Drink, Cebu City


Answer


There is a certain minimum level of understanding that is required from investors in order to minimize the possibility of placing hard-earned money into questionable investment outlets. Basic finance concepts like the correlation of risk and rewards, time value of money and how investment returns are derived should be part and parcel of the decision making process whenever we consider making an investment. After we have satisfied the standards we have set for ourselves in terms of expected returns and the risk we are comfortable to assume, we can then pass on the implementation on these objectives to professional money managers or by choosing appropriate products/services provided by financial institutions.

http://www.philstar.com/Article.aspx?articleId=630091&publicationSubCategoryId=82