What Breadwinners Need to Know About Buying a Life Insurance

Most breadwinners see their primary role in the family as someone who brings 'bread to the table,' or simply put, to provide for the day-to-day needs of the family—food, clothing, shelter, education.

While being a good provider is very commendable, conscientious breadwinners must realize that providing just for basic needs is not enough. A wise breadwinner makes sure that he or she can provide for the family even if they lose their capacity to do so. For example, when you get hospitalized or get really sick, who provides for your family? If you become incapacitated or disabled, who can your family rely on? And if you should pass away suddenly and unexpectedly, who will take care of your family's needs?

The saying "Man does not live on bread alone" takes on a whole different meaning in this context. It is not enough for breadwinners to simply provide for daily needs —they should also look towards the future and provide for their family's financial protection.

This is how insurance helps breadwinners.

Insurance gives a lump sum amount of money to a breadwinner's family in case he/she gets into a situation that prevents them from earning income—an accident, a disability, a critical illness, or when they pass away. With the amount they receive, the breadwinner's dependents can use the amount to provide for not only their day-to-day needs, but also to pay off medical expenses, tuition, housing loans, or car loans,

With this is mind, here are a few things breadwinners should think about when considering life insurance:

A good rule of thumb to determine your coverage is to know your monthly expenses, multiply it by 12 to make it annual, then multiply it by a number of years—a good peg is five years. So for example, if your monthly expenses is at P50,000, that means your annual expenses is at P600,000 (P50,000 x 12 months). You then multiply P600,000 by five (years), which results in an ideal coverage amount of P3 million. With this amount, you are assured that your family is provided for with their day-to-day needs for the next five years, and help them get back on their feet, with the assumption that they will find an alternative or new source of income by then.

There are different kinds of life insurance policies such as term insurance, whole life insurance, and variable universal life (VUL) insurance. Each one offers protection, but has its own unique advantages and features too.

Term life insurance has a specific end-date, whether it’s one year, 20 years, or perhaps up to a certain age (60 years old, for example). Whole life insurance is valid for the rest of your life (or up to age 100), so your dependents are guaranteed a payout no matter the age of your death. Meanwhile, VUL insurance invests a part of your policy in a variety of investment vehicles such as stocks and bonds. However, you’re not guaranteed a fixed interest rate.

As a breadwinner, you should list your dependents as beneficiaries. Whether it's your spouse, your children, your aging parents, or your younger (or even older) siblings—as long as they rely on you and your income, they ideally should be your beneficiaries. However, if your beneficiary is still a minor, it would be better to assign a guardian or trustee in the meantime, as your child/minor will not receive the benefits until they are of legal age.

Another aspect to consider is whether you would want to declare your beneficiaries as revocable or irrevocable. If they are revocable, you will not need their consent to make changes to your policy (i.e. changing the beneficiaries, changing the coverage amount, etc.). However, when the benefit is paid-out, it will be subject to taxes. On the flip side, irrevocable beneficiaries will receive the benefits tax-free, however, the policy owner/insured will need the consent of all the beneficiaries to make any changes on the policy.

As a breadwinner, your dependents seek your reliability. In the same way, your life insurer should also be reliable—one with a proven track record of financial strength and stability, and is trusted by customers. BPI AIA, the number one bancassurance company in the Philippines, is an example of a reliable life insurance provider as it is the partnership between two trusted financial giants in the country: Bank of the Philippine Islands (BPI) and AIA Philippines.

To know more about how BPI AIA can support you as a breadwinner in helping you secure not just your-day-to-day needs, but also your family's financial future, leave us a message or visit a BPI branch near you.