When it comes to financial planning, many people think of insurance as a key to building wealth. However, it’s important to understand what insurance actually does for you—and, just as importantly, what it doesn’t do.
Marvin Cabatana, a Registered Financial Planner, emphasizes that insurance is not a wealth-building tool but rather a safety net. As told to Financial Adviser PH, he explains, “Insurance will not make you rich, but it will protect you from becoming poor.” This is the critical distinction that many individuals miss when considering their financial future.
At its core, insurance serves to protect your assets and income. One of the most fundamental types of insurance is term insurance, which offers the maximum benefit for the lowest premium. “Term insurance is about income protection,” Cabatana states. “It’s there to ensure that your family is financially secure if the breadwinner can no longer provide.”
But that’s not all. Cabatana also stresses the importance of health insurance. “Health insurance is your safety net if the breadwinner is hit by critical illness,” he adds. Without proper coverage, a major health event could potentially force a family to sell their home or rely on others for financial support. The peace of mind that health insurance offers can be invaluable during such stressful times.
Additionally, a well-rounded insurance portfolio includes Variable Unit-Linked (VUL) insurance. “VULs not only offer coverage, but their fund value acts as a secondary source of funds during retirement,” says Cabatana. This means that while VUL insurance isn’t a get-rich-quick tool, it can still play a vital role in your long-term financial strategy.
When preparing for the inevitable, it’s essential to plan for the aftermath, especially when death strikes the breadwinner. Cabatana’s clients know exactly what to do in this case. “They’re trained on where to find the documents, who to contact, and how to handle estate tax payments,” he explains.
In conclusion, insurance isn’t about becoming wealthy—it’s about safeguarding your family’s financial future, especially in the face of life’s uncertainties. Make sure you understand the role insurance plays and integrate it into a comprehensive financial plan.
