As If In Prayer
I just found out.
But first, the back story. On the year I sold my house in Cavite, I bought life insurance coverage for my daughter. It was an endowment type of insurance, one that I would have to pay for 5 years. According to the plan, the sum insured would almost double (x 1.8) on year 3 and my daughter will start receiving money on the 8th year and every other year after that. I thought it was a great plan and a great investment and a wonderful beginning for my insurance business. After all, I get a commission, which means I get to have a good discount. I forgot that I had to pay premium for 4 more years. (pained grin here)
And then I read an article that insurance for children is not really recommended. After all, the purpose of insurance is to replace the income of the person living. Children have no income. Parents provide for them and not the other way around. Life moves forward.
But it was too late. I already bought it.
The date to pay the premium was coming and I was having doubts if I could pay it (my method of payment was annual so I do not have to pay interest – I do not like paying interest). I put in a call to the company and asked for my options – what is the reduced paid-up, what is the extended term, how much is the cash surrender value.
The agent on the line told me that because I only paid for 1 year, it is zero.
Zero.
All the money, all that money, will go down the drain. If I do not go on with the program.
I hyperventilated.
I had a suspicion that I will not be too happy with what the agent will tell me. But I did not prepare myself for zero.
I do not like the zero non-option.
So I argued with her a little bit and told her that I could live with a paid-up insurance for as little as 5 years in an amount that was 20% of my amount insured. Heck, I could do with 3 years at 10%.
Just not zero.
The answer was still no but she said she could get me another insurance that had an annual premium that I can afford.
I was placated and then I realized that it was all smoke and mirrors, that all the money I paid before will not pay for this new insurance, that it is actually a different insurance. I called to confirm my suspicions.
She confirmed my suspicions: “Ma’am yes, this is not a paid-up insurance for your old premium. But I got you a good deal – the premium is for your daughter’s age last year.”
Uh, thanks but no thanks.
Because the thought of getting nothing for a good amount of money is still very disconcerting. Yes, I will be cutting my losses. Yes, I will not have to struggle to make another payment. Yes, I can move on.
But I cannot move on knowing I led myself to this. I cannot forgive myself for wasting money. And that is what I would be doing if I fail to continue.
Defeated, I told her I will just change my payment method to quarterly.
Friends, here are my lessons:
Lesson 1: Before getting insurance, make sure you can pay it because you will have to pay it.
Lesson 2: You have to pay it to the end. Finish the program. Otherwise, you get nothing. Or almost nothing (cash value is very disproportional to the money you put in – think 1/2 for year and then just 1/3 for year 3).
Lesson 3: Read your insurance contract. The things that will happen if you discontinue will be there. Do not think that your agent will do something entirely different, or be on your side, because they are given very little or no elbow room. They are not the insurance company.
Lesson 4: Insurance is not investment. It is for eventualities that might happen. It is something you pay hoping you will not have to collect, or at least not too soon. Do not, for once, think that you are making money off insurance companies. You will, but not immediately. At least not until 30, 40, 50 years have passed.
Good luck with your insurance decisions. And may you be spared the agony of having to discontinue one.
Article by Issa. Art by D. Copyright 2010.
Website: www.YouWantToBeRich.com
Email: issa@youwanttoberich.com
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Pingback: Melissa Briones
Ask any 60 year old and above, if he/she wished they have bought more Insurance in his prime. Your parents are a good candidate as they have their best interest in your heart. Buying an Insurance for your kid is actaully great, as she will be in better financial position down the road. Buying Insurance is never risky.
I am 43 now, I really wouldnt mind if my parents bought me Insurance ages ago as I would have bought the proceeds for my kids too without any real cost to me. A gift from one generation to another. Compounding at its best.
I agree. I have some friends who bought insurance for their children at age zero, which is great. Other options, like here in Canada, would be the education plan for children (called the RESP or Registered Education Savings Plan), where the government matches a percentage of the amount you deposit. I think I would go with this rather than life insurance for my children. But people should ask and know what option would be best for them. Thanks!