As a family provider, everything you do revolves around your loved ones. You are always focused on making sure that their needs are met above all things. You are your family's foundation.
But what if an unexpected illness or sudden accident were to hit and turn your life upside down? Will your savings be enough to cover the expenses? Or what if you are taken out of the picture, can your family sustain their lifestyle even when you are no longer around to provide for them?
This is where insurance plans become more than just a policy, but a plan to help life continue moving no matter what the future holds. Having all-around coverage that protects you from various life risks, such as accidents, sickness, and disability, can shield you and your loved ones from financial stress and provide peace of mind.
But with all the plans available in the market that offer extensive protection or additional benefits, what key factors should you consider when selecting one for your family?
Key Takeaways
- The right insurance plan will bring peace of mind and protect your family from financial stress during uncertain times. Go for a plan that offers all-around protection to secure your family, no matter what life brings.
- Ideally, your insurance coverage must be equal to 10 to 15 times your annual income. When calculating, factor in your debts, living expenses, dependents’ needs, and long-term goals, too.
- It is important to choose a plan that offers flexible protection coverage, allowing you to adjust your coverage based on your family's needs.
Key factors to consider when determining what and how much insurance you need
You're considering getting an insurance plan—exciting! But how much coverage do you really need? There’s no one-size-fits-all answer, but here are some essential factors to consider when choosing an insurance plan and determining the appropriate coverage:
Your income and future earning potential
Start with your current net income. Calculate your annual salary and consider other factors such as raises, promotions, and career advancements. Keep in mind that insurance coverage should replace several years of income in the event of your untimely passing, plus an additional buffer for inflation. A common rule of thumb is to aim for 10 to 15 times your annual salary.
Outstanding debts and liabilities
Do you have a mortgage, car loan or credit card debt? Your insurance should be able to clear these debts, so your family isn’t left with the burden. If your debt and liabilities have insurance of their own, that is a major plus. But make sure to still take these into account when computing your target coverage.
Your family’s living expenses
Calculate how much your family needs each month for essentials including budget for food, utilities, schooling, and transportation. Multiply your monthly expenses by the number of years you believe your family will need financial support to adjust to the loss.
Future goals and milestones
Planning for your child’s education? Dreaming of building a family business? Your long-term goals should be considered as well when deciding how much coverage you need. All your goals and milestones should also be protected as part of your family’s future.
Number of dependents
The more people who rely on your income, the greater the coverage you need. Your dependents can include your spouse, kids, aging parents, or siblings. When planning, note the financial support you are providing to them. Understanding the number of years your dependents would need to regain financial stability after your death is also essential.
Critical illness and accident coverage
Another important factor to keep in mind when considering a plan are the unexpected financial risks from critical illnesses and other emergencies such as accidents. Did you know that the estimated cost of cancer treatments ranges from ₱120,000 to ₱1,000,000?
Funeral costs
Keep in mind that part of the possible costs when passing are the costs associated with your burial. These include funeral service fees, casket or urn costs, transportation fees, burial plot expenses, and any additional services such as memorials or flowers. Ensure that these costs are also considered when computing for your insurance coverage.
Calculating how much insurance you need
Here’s a simple step-by-step method to estimate the right amount of insurance for you:
- Step 1: Add up your financial responsibilities.
Calculate all your expenses and financial obligations. Here’s an example based on an individual earning approximately ₱800,000 per year:
Annual Income × Number of Years You Want to Provide for Your Family
Example: ₱800,000 × 10 years = ₱8,000,000
Outstanding Debts (e.g., mortgage balances, car loans, credit cards)
Example: ₱2,000,000
Future Expenses (e.g., child’s education, retirement fund for your spouse, your estimated funeral expenses, or estate taxes that your heirs or beneficiaries might need to settle to transfer and distribute assets registered to you such as properties, savings, or investments, legally to them)
Example: ₱1,500,000
Total Insurance Coverage Needed: ₱11,500,000 - Step 2: Subtract Existing Assets
Calculate all savings, investments, and any existing insurance coverage you already have. Then subtract these from your initially calculated target coverage amount.
Example:
Bank savings: ₱2,000,000
Other insurances (if any): ₱3,500,000
Total Assets: ₱5,500,000
By putting all together, this will determine how much additional insurance coverage you need to financially support your loved ones:
Insurance Coverage Needed: ₱11,500,000 – ₱5,500,000 = ₱6,000,000
This is a basic formula, but it gives you a good starting point. You can always adjust based on your personal goals. Furthermore, you can always get help from a licensed financial advisor for a more tailored plan.
An all-around protection that’s flexible and affordable
When it comes to protecting your family, the right insurance coverage should give you the confidence that they can sustain their lifestyle for 10 to 15 years, even in your absence. With the variety of insurance plans available, the best option is to choose a plan that’s flexible in terms of payment options but also offers financial protection from various risks to keep your family's finances stable, no matter what life throws your way.
AXA Philippines has just launched its newest variable unit-linked (VUL) or investment-linked insurance plan, AllShield, which provides all-around protection. It offers not only increasing insurance coverage but also solid protection against accidents, critical illnesses, and serious injuries. With this plan, you can be assured of your life insurance coverage while minimizing concerns about other risks. And for just ₱59*/a day, you can access all these benefits, including protection bonuses on the 10th and 20th years of your policy, which provide an additional increase in coverage. Here's how AllShield can wrap your family in love and protection at an affordable price:
- ₱1.1M++ worth of life insurance coverage
- ₱2.2M++ in case of accidental death
- 100% premium waiver in case of disability
- 74 critical illnesses covered
*Based on a regular-pay plan of 30-year-old female.
With AllShield, know you can enjoy peace of mind knowing your loved ones are secured from multiple angles. To learn more about AllShield, an all-around protection plan, talk to an AXA financial advisor today.
