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The relevance of life insurance today

If there’s one lesson we must heed from the Covid-19 pandemic, it is this: we cannot eliminate risks from happening, but we can avoid their worst consequences. We are never totally helpless even against the most serious threats. The key is preparedness for the expected as well as the unexpected.

Well-being should not be our only concern at this time. Equally vital is our financial health. For the same reason that we wear face masks and face shields for personal safety, we must likewise ensure that we and our loved ones are protected against the threat of severe financial loss from Covid-19. What is most disturbing is, if a breadwinner loses his life, his income for the family is gone forever at a time when the economy is battered and jobs are scarce. Equally fearful is the cost of being hospitalized because it can easily wipe out a person’s savings or plunge the family into serious debt. 

I see at least three relevant perspectives for life insurance at this time. These are survivorship protection, family health security, and protection of personal frontliners.

Survivorship protection is about bridging the financial gap many Filipino families are already facing even before Covid-19 happened. If the principal earner suddenly passes away, there is not enough money left for the family’s living expenses. In 2014, global reinsurer SwissRe calculated the average annual financial shortfall to be P90,000. Even if we inflate that to P120,000 for 2020, that only gives the family P10,000 a month for their expenses.

What then can they do? They can try saving more, but this will take time. Or they can buy life insurance because it is the only financial instrument that pays out the intended amount despite an unexpected loss of time.

Second is family health security. We are facing a virus that can lead to substantial medical expenses for any member of the family who gets infected. In a 2017study, SwissRe reported that 56 percent of all health expenditures in our country then were paid out-of-pocket.

No wonder most Filipinos do not want to be hospitalized! Health insurance is therefore a must for those who don’t want to pay medical costs solely from their life savings.

Lastly, there’s the aspect of protecting personal frontliners, our helpers who are devotedly serving us throughout this crisis. In the same way we show compassion and support for health workers at this time, why can’t we sponsor life insurance protection for our own kasambahays? Never have we owed so much to the unheralded ordinary workers in our community. They also deserve financial security, and it doesn’t take much to give them as well as their loved ones a hopeful future.

The challenges of Covid-19 and our changed environment will be with us for some time yet, but inevitably these trials will also pass. We can simply adapt to survive, or we can build an even better future by being more prepared for the uncertainties of life. This is the relevance of life insurance today.

*Jess Hofileña is a retired senior executive with a 42-year career in the life insurance industry. He continues to pursue his risk management advocacy as an independent adviser to the Board of BDO Life, a lecturer on Insurance Planning for the Registered Financial Planners (RFP) Association of the Philippines, and an honorary adviser of the Professional Insurance and Financial Advisors Association of the Philippines (PIFAAP)*

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