More insurance-related topics to write about — and this comes but the second installment of a blog series about pre-need life plans. If you haven’t read the first one, here’s your quick link — Pre-Need Life Plan and the Costs of Deathcare Services in the Philippines.
The article reassures that a pre-need life plan gives another layer of financial security for the family and loved ones, especially that funeral and burial services get costlier year after year, however, may stay behind life insurance when it comes to flexibility, reliability, and recommendability.
You might have read or heard from many financial experts that pre-need life plans are less recommended than other financial products, particularly whole life insurance.
Quite interestingly, pre-need life plans these days already come with value-added benefits, e.g., St. Peter Life Plans come with installment waivers and accidental death and dismemberment cash benefits, making financial decisions more complicated.
Now, instead of choosing between life insurance and a pre-need life plan, let’s consider the advantage of getting both. As the chiché goes, why do we have to choose when we can have both?
Let’s do a recap of the difference between these two financial products.
Life Insurance Versus Pre-Need Life Plans
Life insurance (protection from the unexpected) ensures the life of the insured. People buy life insurance policies for the financial security of the family and loved ones, primarily upon sudden death and other unexpected events that may threaten the source of income, such as accidents, critical and chronic illnesses, and permanent disabilities.
A pre-need life plan (plan for the expected), sometimes called a memorial life plan and a pre-need funeral contract, on the other hand, is a pre-paid plan for the same that is accepted as inevitable — death, and thus, for the preparation for the costs of deathcare services that generally include funeral, burial, and memorial.
To better understand and make more informed decisions about these two, here is a detailed contrast:
Purpose. As mentioned, life insurance is financial protection from the unexpected, whereas a pre-need life plan is a plan for something expected.
Recommendability. Life insurance, e.g., whole life with accident, disability, and critical illness policy riders, is preferred and recommended by financial advisors and experts over a pre-need life plan.
Reputation. Life insurance was introduced way earlier and, thus, more established than pre-need plans. The latter has also gained a negative impression and reputation because of the pre-need companies that went bankrupt, e.g., the College Assurance Plan (CAP) that could no longer pay its obligations to clients who lost their hard-earned savings supposedly for college educational plans.
Market. Life insurance is generally recommended and marketed to family breadwinners, whereas a pre-need life plan may be for everybody, young and old.
Eligibility. Life insurance companies conduct a process called underwriting to gather information about the persons who apply for insurance and identify the risks. Policies get more expensive as people age and physical bodies decline, and others may no longer qualify for one. With a pre-need life plan, this process is usually not necessary.
Beneficiaries. With life insurance, family members and loved ones are assigned as the beneficiaries who may directly claim the benefits. In contrast, with pre-need life plans, it is the funeral service providers.
Agents. Life insurance agents take qualifying exams administered by the Insurance Commission, sometimes requiring them to take additional and higher-level exams for products with investments. On the other hand, life plan agents are simply required to undergo training by the pre-need companies.
Premiums. Both life insurance policies and pre-need life plans may be purchased in a one-time payment but may also be through installments or premiums, which may be in monthly, quarterly, semi-annual, or annual terms. Life insurance policies are usually more expensive and, thus, come with longer payment terms.
Benefits. Life insurance benefits vary on many factors, such as insurance types, underwriting, policy riders, and many more. Still, the good thing is that beneficiaries may claim the benefits if unexpected events happen to the insured as long as the policy is active or in force. Although extra benefits such as value-added insurance and installment waivers are now part of many pre-need life plans, in some other cases, the plans need to be fully paid for the provision of funeral and burial services.
Claims. Life insurance benefits are usually in a lump sum of money which can be claimed at the time of maturity or in case of death of the policyholder, whereas, in a pre-need life plan, these come in the form of paid-up services.
Flexibility. Life insurance beneficiaries may use the benefit claims for whatever purpose deemed necessary or priority. In contrast, funeral service providers, the beneficiaries of pre-need life plans, deliver the pre-paid services as stipulated in the contract.
Life Insurance and Pre-Need Life Plans: Can I Get Both?
At this point, you might have already understood the differences between the two financial products — life insurance and pre-need life plan — and decided which one is better or offers better financial protection for your family and loved ones.
So, the big question now is — Can I get both? In a quick answer, yes. You can, and maybe, you should.
But, you prioritize purchasing a life insurance policy first as it offers better financial protection for your beneficiaries against life and economic uncertainties. It’s not a matter of if, but when, and you need to have this Plan B while you still can. Then, you get pre-need life plans for you and them. Also,
- Both life insurance and a pre-need life plan offer you peace of mind as you know that you make advanced arrangements and payments for both the unexpected and the expected turn of events.
- Both can mutually work together or coexist to serve your financial needs for savings, protection, and wealth conservation.
- While traditional life insurance policies offer a fixed amount of monetary benefits, you pay less for more. On the other hand, deathcare services keep getting costlier year after year, so you’re making significant savings by purchasing pre-need life plans.
- Both can be availed at flexible payment premiums and terms.
- Both life insurance policies and pre-need life plans can be customized based on the riders and benefit options, your needs, and preferences.
Disclaimer: All tips, top picks, and recommendations in this article, however well-researched, informative, and practical, do not necessarily constitute professional or expert advice. You are thus encouraged to do further research and confirmations, make informed financial decisions on your own, and even seek guidance from your financial advisor if you have.
Pre-Need Life Plan — and the Costs of Deathcare Services in the Philippines. This article explains that a pre-need life plan can give additional financial security for the family and loved ones, especially that funeral and burial services get costlier year after year, but it may just be behind life insurance when it comes to flexibility, reliability, and recommendability.
How to Choose the Right Life Insurance for You [Guide for Filipinos].This article provides comprehensive information about life insurance and what makes it extremely important, as well as a helpful guide on choosing the right life insurance policy based on needs and preferences.
Global Recession 2023 — and Your Plan B Against Economic Uncertainty. This article underscores the need for a Plan B — life insurance — financial protection for the family and loved ones in the face of life and economic uncertainties.