(If you want a quick guide for beginners how to start investing in the Philippine stock market, you can download your free ebook here.)
Below article is the second part to complete the previous post on the importance of investment safety nets all investors should have.
Click here to read the first part.
Second investment safety net – Income Replacement
Its sole purpose is to sustain the life of your family for at least 5-10 years without you providing for them.
If you don’t want to follow the formula: Income Replacement (IR) = Annual Income x 10, then use this instead: Annual Expenses x (5-10). The bigger the better and you will have more peace of mind.
Remember that Income Replacement is not for you to enjoy. Income Replacement can be provided by a “Pure and Term Insurance” only which is much cheaper than any other bundled insurance available in the market.
If you are a corporate person, then right now you are covered with group insurance policy which you cannot take with you when you retire.
Your financial position will be much better if as early as today you can secure your family’s future and your assets.
The features and functions of a Pure and Term Insurance are:
1. Its cheaper because there is no savings portion. (Your savings will earn much more if you invest it correctly, say 12 percent to 60 percent per annum.) Quit one merienda for P30 to P50 a day and you can already protect yourself and your family with a P1 million coverage that will double if death is due to accident.
2. The major function of “Pure and Term Insurance” is Income Replacement if you die too soon without completing the wealth-building process. Your family should be able to sustain their life for the next five years even without you providing for them.
3. Why Term only? Because your insurance coverage must increase as you become wealthier, so as to protect all your assets.
4. Another function of insurance is that it can help your son and daughter pay off the needed estate tax within 90 days upon your death which is 20 percent of your total estate, to facilitate transfer of your estate to their names.
5. It’s Tax free so it’s good money for your family. Why die without value when you can die and GIVE millions of pesos for your family, loved ones or even to charitable institutions?
“Insurance is not about you getting or receiving. Insurance is all about you giving and loving.”
Have sufficient “Pure and Term Insurance” to protect your life and all your accumulated assets.
PS: The above piece is a short section of a sample Wealth Strategy article of Truly Rich Club from Lyndon Malanog. (Click here for the first part of this article.)
Lyndon Malanog, one of my personal mentors, is an Entrepreneur and the Financial Coach of Bo Sanchez, Inc.. He continuously gives “Financial Discipline and Wealth Management” seminars to companies and groups as part of his noble mission and advocacy of educating people. If you also want to be one of his students, you can contact me here and I’ll help link you to him.
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