Tag Archives: financial protection

Combined Mutual Fund and Insurance

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by: Francisco J. Colayco

first published in Good News Pilipinas on October 23, 2009

Some asked me about a kind of insurance policy, which offers the insured the option to define whether he wants more protection or investment in one single instrument. His kind of policy is sometimes called VUL or Variable Universal Life.  VUL generally offers higher returns compared to the ordinary life insurance policy.

You should remember that like mutual funds, there is no guarantee of a specific rate of return. Some VUL policies guarantee return of principal if maintained over a specific period of time. In such a case, you will at least get your investment back even if it does not earn.

VUL policy can be a good alternative particularly if you need to have life insurance protection.  The main advantage is that you have both the mutual fund and an insurance coverage.  The mutual fund that is incorporated in the VUL is a mutual fund that is established and managed by the insurance company itself.  In general, there are agents for insurance policies and therefore, their commissions are deducted from the premium that you pay.  This means that the amount to actually go into the investment for the mutual fund portion could be reduced by that commission.

You should ask your insurance provider about the effect of the commission and what specific type of mutual fund your premium payments would be invested in.  Usually, there are fixed income, equity and balanced mutual funds. Be also sure that you fully understand the terms of the VUL, particularly the provisions on lapsation if any.  Lapsation means that if you forget to pay your premium, will the insurance company consider your policy as cancelled or will it give you time to pay etc.

Generally, VULs are cheaper and more cost effective compared to the ordinary whole life insurance policy.  Another advantage of VULs is that being an insurance product, your VUL policy is not subject to garnishment.  Garnishment means that if your assets are foreclosed for whatever reason, the VUL policy is not considered an asset for foreclosure.

On the other hand, investing directly in a mutual fund offers only pure investments.   It gives you more flexibility in case you want to withdraw part of all of your investment should the opportunity or need arise. If you take this route, in addition to the mutual fund, you should consider getting yourself term life insurance, which is simply buying life insurance protection year by year.

Beware of Card Skimming

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by: Art Ladaga

Few days ago, news got out about a woman who lost her retirement fund of P400,000 from her ATM account. For 31 years, she worked hard to earn and save that amount. Investigation revealed that her bank account details were obtained without her knowing it. Apparently, someone installed a device in the ATM machine she used and copied her card’s details (for more details of the story, click here).

The woman was one of the victims of card skimming, a dubious practice where criminals install a device within an ATM machine to obtain card details of ATM holders. Most of the victims are those who have a big amount of money in their ATM accounts. In just a blink of an eye, they can lose everything they had worked for.

We at the Colayco Foundation would like to remind everyone NEVER to have a big amount of money in your ATM account. It’s important to spread your money in different investments. Mr. Armand Bengco, the foundation’s Executive Director, recommends having only an amount up to P5,000 in your ATM card, especially if it’s your payroll account. Life savings (if one already has it) should be placed somewhere safer like a time-deposit account.  Putting it in an ATM account is highly vulnerable to ATM skimming.

When handling your ATM card, you must always exercise caution. Here’s an infographic from Inquirer.net on how to protect yourself against card skimming:

There’s a deep truth in the saying “Prevention is better than cure.” And this is highly applicable in personal finance. If you do not exercise it, then you risk losing the wealth you worked hard to achieve.

Sources:

http://http://kickerdaily.com/ex-cop-loses-p400k-retirement-fund-to-atm-fraud/

http://business.inquirer.net/176605/bsp-officials-downplay-atm-fraud-in-ph#ixzz3AM77rF8C

*Art Ladaga is the current Programs Development Officer of Colayco Foundation for Education

 

Protect Your Greatest Asset

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Here’s an article from our Managing Director, Guita Gopalan, about getting financial protection for your greatest asset!

Protect your greatest asset – YOU. You are your greatest wealth generator.

Now just a reminder, a REALLY REALLY IMPORTANT REMINDER! All your hard work in investing can be washed away if your don’t have financial protection. Major emergencies and unforeseen situations befall everyone at least once in their life. And then you have the many minor emergencies. Sometimes we get so used to managing them that our life becomes a series of things to ‘damage control’ and our finances never take off towards the wealth goal.

Major emergencies – hospitalization, operation, calamity, job dismissal, loss of life, disability, etc. – often require a significant amount of money to be able to address adequately. If you don’t have financial protection and all you have are investments then you may find yourself in a position where your investments are doing badly and because of an emergency you’ll have to get your investments…You lose out on what you could have or should have earned. Or your investments could be doing really well but you’ll be trading in your intended financial goal to meet the emergency requirement. The good news is that both situations can be avoided simply by having enough financial protection.

Want to read more? Click here!