Back Up Plan to Education, Pension and Memorial Plans


I previously wrote a blog on why it is important to spell the difference between a pre-need firm versus a life insurance company. With a string of unfortunate events on pre-need companies that started with College Assurance Plan in 2008, followed by Yuchengco-owned Pacific Plans in the same year and Legacy Group in 2009, and lately, Prudentialife Plans, our clients can’t be blamed for being resistant and cautious with investing in such organizations.

To us, financial advisors of big life insurance companies, we want to “avoid the stigma” of being interchanged or mixed up with our pre-need counterparts. But reasonably to our clients, they want the assurance of getting their claims when that appropriate time arises.

So what can be the back up plan?

Is there an alternative out there when clients still want to invest in a vehicle that will allow them to fund future educational expenses of their children, or save up for retirement that will allow them to have money to augment their savings and use when they retire, or prepare for death which is inevitable?

My recommendation is to invest in mutual funds or unit investment trust funds (UITFs) that are being offered by life insurance companies. While the withdrawal and protection benefits are NOT guaranteed, since they are determined by the investment performance of the underlying assets, the yield (which is significantly higher than what the banks’ savings rates offer) will be able to make your pool of money bigger to fund your  financial requirements in the future.

Other advantages in investing in mutual funds/UITFs:

  • The fund is highly diversified, thus lowering the risk of investment.
  • The fund relieves the investor from administering the investment.
  • The fund is managed by highly experienced professionals and are very well knowledgeable about risk management.
  • The investor can start with low investment capital (some allow 10k start-up funds).

Typically, mutual funds have a medium to long-term investment horizon. Financial advisors recommend that at least the client keeps the money in the fund for at least 5 years. Aside from avoiding the penalty or surrender charges that are usually incurred in the early years of the investment period when one partially or fully withdraws, the fund is proven to grow considerably over a longer period of time.


When preparing for an educational fund, usually the parents purchase plans when the kids are either newly born, or when they are in their toddler years.


Planning for retirement usually happens (especially for the more forward thinkers) at the age of 30-35 years old when reality hits the working professionals that they really do need to save up for their retirement years and they can’t be working forever.


On the other hand, some folks get memorial plans at their late 30’s or 40’s, when they realize the importance of having one and that they won’t live forever either. 

The timeline for these future financial requirements actually matches the investment horizon of mutual funds which is  minimum of 5 years up to 10, 15 or 20 years. Of course, one has to consider his or her own level of risk tolerance. The client always has to be in the know of the market conditions affecting the performance of the fund.

I personally recommend also those mutual funds that have an insurance component embedded on the plan. This kind of investment allows the client some flexibility to choose the higher value between the guaranteed death benefit or the account value of the fund. For me, if for some reason the fund crashes (w/c is unlikely over the long term) into less than half of its value, the client is assured to get the insurance component which is a % of its initial investment. (Assumption here is that something happens to the insured i.e. death) In any case, if this will be the preferred investment vehicle, the beneficiaries can be the children or the spouse, of which they can utlimately use the settlement funds for education and pension.

So, it’s really a win-win situation here 🙂


For more guidance, you may consult your financial advisors or email me at





Why Is It Important to Spell the Difference Between a Pre-Need Company and Life Insurance Company


I had a client who almost got a protection plan to cover herself since she’s the sole breadwinner of the family. But when the news about Prudentialife Plans’ troubles came out, this client retreated and cancelled her plans of subscribing to this savings and protection instrument. The thing is Prudentialife Plan is a pre-need company while Philamlife is an insurance company.

With these types of news where insurers (whether it’s a pre-need or an insurance company) cannot fulfill claims of their clients and eventually have their licenses suspended, the natural reaction of the people is to defer their plans of purchasing these instruments that could have been beneficial for them in the long run.

And sometimes we can’t fault the public for interchanging the two, but I think we need to make a clear distinction between the two so we can properly guide the people when making investment decisions.


The following are the major differences between a pre-need company and a life insurance company:


Until recently in January 2010, the pre-need industry was governed and regulated by the Securities and Exchange Commission (SEC). On the other hand, the insurance industry has always been regulated by the Insurance Commission (IC) and follows strict international rules, practices and ethical standards. 

As a result of repeated pre-need troubles and woes, the regulation was over taken by the IC from SEC and a tighter framework and governance were instituted.


Pre-need companies used to adhere to minimum capitalization requirements as mandated by the SEC – typical of any incorporated entity in the country. On the contrary, life insurance companies follow a higher minimum capitalization requirement as mandated by IC, in order to absorb a larger amount of risk for all the businesses it generate.

As of February 2012, the government has announced plans of hiking minimum capitalization to Php1Billion applicable to all life, non-life and reinsurance companies.





Generally, the investment strategy of the pre-need industry opted for high-yield, high-risk instrument and/or illiquid assets such as real estate.  On the other hand, life insurance companies must meet rigorous investment guidelines set by IC to ensure long-term solvency and liquidity. 

These are some of the major differences that should be remembered by our clients. No, we can’t blame them as we Filipinos have a herd mentality – but also good to know about these things as well so we can make informed and wise decisions especially when it comes to our hard-earned money.

General tip: A pre-need company ends with a “plan” in their company name while a life insurance company ends with the word “life”. Examples: PhilPlans, Loyala Plans, College Assurance Plans and Legacy Consolidated Plans are all pre-need plans. SunLife, PhilamLife and Manulife are all examples of insurance companies.

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Don’t miss this!


CNN is featuring the Philippines every day this week 7-8 am. It’ll include the BPO industry, OFWs/seafarers, and others on our economic growth and challenges.

What It Means To You (WIMTY):

This is our chance to shine and let the world know that we’ve got what it takes to be on the top-priority list for investments and tourism!

What does K-12 Mean to You?


Department of Education announced last year the implementation of K-12 or the expanded 12-year basic education system in the upcoming school year. One of the benefits of the K-12 program is improved curriculum for holistic growth among students, especially in Math and Science subjects. This will also enhance our competitive advantage globally such that it will match the same number of years of education in other countries.

How will K-12 work?

The model is K-6-4-2 or Kindergarten plus 6 years of elementary education, 4 years of junior high school, and 2 years of senior high school. Curriculum for senior high school will now include specializations in science and technology, music and arts, agriculture and fisheries, sports, business and entrepreneurship among many others. These are now more relevant to the career path that they want to pursue when they start working. With this program, students now will now graduate at age 18, instead of 16.

What It Means To You (WIMTY):

The additional 2 years will mean that parents will have to be more financially prepared for the school expenses of their children. Annual tuition fee hikes are inevitable and the additional 2 years to be spent on educational expenses will require more savings and investments TODAY.

Contact your financial advisor now so you know how to best prepare for this change.

How to Choose the Right Life Insurance Company



There are many considerations when you select a life insurance company for yourself and loved ones. After all, it is your hard-earned money that you will be entrusting to this company and will see you through your future financial requirements.  But with information overload, plus 5 out of 15 companies claim that they are the market leader, how and what company do we choose so we get the best out of our investment?


For me, in deciding to which company to go to is like picking the perfect marriage partner in life. There are traits in a life insurance company and partner that are essentials and non-negotiables, and there are features that are just nice to have but really unnecessary.  (I personally think I had a harder time choosing my partner in life though! Hahaha)

There is a checklist wherein it guides an individual on how to go about this important task of choosing and eliminating risks and bad choices. I came up with my own checklist and I hope that the following characteristics below are applicable when opting for your insurance company of choice:

  • Stability and integrity of the company – The financial soundness of the company is imperative for it to be able to deliver to its promises in the future. Those companies struggling with any of its commitment to its policyholders are never to be trusted. As a policyholder, you should be able to research an insurance company’s assets, paid-up capital, net worth and all other relevant financial metrics. These are readily available online on the companies’ websites or Insurance Commission’s official website.  (These are accurate numbers so when in doubt that one company claims they’re the industry leader, you won’t be fooled in believing otherwise!)
  • Historical background – Check the claims (read: when policy holders need to get their policy benefits) history of your life insurance company.  Do not only validate claims on death benefits, but also check on claims of living benefit (if insured survives or outlives the policy), claims on health, accident, etc. This will give you a good gauge if the company has the ability and integrity on fulfilling stipulations on the contract of their clients. Be mindful as well of the press – be on guard for any bad press or “heard it through the grapevine” type of news, so that you’re on guard in protecting your assets. Likewise, ask your parents’ parents if they experienced any challenges on claims being contested and denied in the past. Most likely if they’ve had this issue before, it might recur in the future.
  • Products and Offerings – Be on the lookout for insurance products that are not only affordable but would meet your needs as well. Evaluate each offering closely and check if this fits your requirements. Don’t fall into the trap of buying without clearly understanding the policy inclusions. I used to get insurance without totally grasping what I was covered and entitled for since I was just too busy to go over the prospective policy carefully. It’s only now that I realize that I was so naïve on my insurance purchases before! (My agent must have made money on my ignorance.)
  • Quality of financial advisors – These advisors are the insurance company’s frontliners, so it’s important that we are able to trust these folks who are supposed to catch our back.  Since I mentioned that I once was “uneducated” when buying life protection, I always left the decision to my trusted financial planner. (Good thing she is my mom!) But be wary as well… be discerning that they are sincerely after your financial welfare and not only after the commissions from the sale. These financial advisors should have a long-term client-agent relationship, one that will provide the best needs-based advice to meet all your needs.
  • Branding image – Don’t be too mesmerized with companies who have “fireworks-type” or extravagant advertisements and promotional activities.  It would be nice if these companies have the budget to burn but personally, I wouldn’t over do it and rather conserve the money to re-invest and pay those future claims. Typically, the “real market leaders” have steady, no-nonsense and straight-to-the-point advertising.

In essence, you need to do your due diligence before selecting a life insurance company and purchase a policy from them. Make comparisons, do “insurance window shopping”, compute for the benefits and exclusions… just do your homework and for sure you will arrive at the best and informed decision at the end of the day.   Choosing the right life insurance company for yourself can be challenging. But like finally finding your lifetime partner, it has its long-term reward and will give you companionship and stability in old age 🙂

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What is the Difference Between Traditional Life Insurance and Variable Life Insurance


What do you do when you have money in your hands you want to invest but don’t know where to put it in? You sit with your financial advisor and he presents to you this plethora of investment choices that you are left more confused than ever.

In this article I hope to make a brief distinction between a traditional life insurance versus variable life insurance.  This is so you are clued-up on what type of insurance plan matches your financial requirements, lifestyle and risk tolerance.

Traditional life insurances: 

  • Examples of traditional life insurance are Permanent (Whole Life, Endowment) and Term or Temporary.
  • Offer high level of savings within a specified term of years or can be whole life.
  • Can provide guaranteed cash values and dividends for participating policies.
  • No changes or addition in premiums are allowed to increase maturity benefit.
  • They have definite protection and death benefits and are stated at the inception of the policy.
  • Do not have highs and lows of investment returns and its death benefits are guaranteed (except for the dividends component).

Variable life investments and insurances:

  • Types of investments are fixed income securities (cash deposits, onshore accounts, government bonds (T-bills/T-bonds), corporate bonds (debenture, secured, convertible), shares/equities, common trust funds/unit investment trust fund/mutual funds, real estate. 
  • Are more suitable for those with medium to high risk tolerance. These are for policy owners that are not risk averse and who can tolerate risks of short-term fluctuation in their investment and policy values.
  • For variable life insurances, it offers potential for higher returns but at the expense of market volatility and higher degree of risk.
  • One can give flexible premiums with returns that will vary in these investment-lined/unit-linked and equity-linked types of variable life insurances.
  • Investment returns are not guaranteed and will fluctuate based on the rise and fall of market prices.
  • These have clear structure on which caters separately for both investment and insurance protection.
  • The withdrawal and protection benefit are determined by the investment performance of the underlying assets.
  • No policy loans are granted to policyholders but partial units of the investment can be withdrawn any time by selling it back to the life insurance company.
  • Additional investments are allowed anytime. E.g .if you initially invested 100k into a mutual fund/unit trust fund, you can add on additional amount if you want to increase your pool of money and maximize high yield.
  • Variable funds provide a highly diversified portfolio thus lowering risk of investment.
  • The fund relieves the investor from the hassle of administering his/her investment.
  • The fund enables small investors to participate in a pool of diversified portfolio even with low investment capital.
  • When claiming death benefits, one can choose the full withdrawal value or the guaranteed sum assured (whichever is higher).
  • The impact of changes in investment condition on variable policies is borne solely by the policyholder.
  • The volatility of the returns depends on the investment strategy of the fund manager.
  • Have a larger exposure to equity investment than with other traditional policies.
  • Funds can be switched as deemed fit by the policyholder


They usually say that diversity is key. I recommend that you assess your existing portfolio and ensure that you protect your investment objectives given the available investment instruments in the market.


Once again, sit with your financial advisor and see what best instrument suits your current situation and your future requirements.

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