Uncategorized

Reader Question – Which do I prioritize first? An emergency fund or life insurance?

March 23, 2021

Hi and welcome to a new Reader Question post.

 

I try to do this kind of post once or twice a month to give way to inquiries I receive on my personal Facebook account, the SavingsPinay PH on Facebook and through SavingsPinay PH on Instagram.

 

I do encourage you to send any budget, savings, investment or making extra income question you may have so I can answer through a blog post. You can send it via DM or email at izza@savingspinay.ph.

 

This month’s reader question is:

 

Which do I prioritize first? An emergency fund or life insurance?

 


 

Be part of the SavingsPinay Email List

 

First let’s have a quick review and define each.

 

Emergency Fund is 3-6 months worth of expenses (or income) saved for emergency use. Your emergency will be your first line of defense in the following situation:

 

1. Losing your job. A safe and secure job is not for everyone. No matter how stable you think your job is, there’s always a room for mistakes and room for sudden reshuffle, unwanted layoff and the like. If you lose your job tomorrow, how will you (and your family) survive.

2. Sickness in the family. A sickness in the family can make a sudden difference in the overall household finances. Not to mention the emotional stress the situation will bring.

3. Accident or death in the family. This is another traumatizing situation that may happen to any family. An emergency hand can help you make it through. Getting a life plan can also be a good option.

4. Car repair. A car is an asset that needs to be maintained. There might be a day you encounter problem with your car and will need money to pay the bills.

5. Unexpected disaster or catastrophe. Nothing is worse than losing your home. With an emergency fund set aside you’ll be in a better position once your house is hit by a typhoon or fire.

 

Life Insurance, on the other hand, is defined as a contract between the policy holder and the insurance company, where the life insurance company pays a specific sum to the insured individual's family upon his death.

 

In other words, a life insurance can only be used at a time of your death. More of a legacy.

 

Given the reader question is whether which of the two one should prioritize first, I’d personally choose a fully-funded emergency fund.

 

This doesn’t mean getting a life insurance is not important. This is just a matter of what to prioritize first.

 

Should an emergency happen an hour after you read this post, or tomorrow do you have enough cash to pay for it? Or will you have to get into debt?

 

If your answer is yes, then make sure you have a working emergency fund first.

 

However, in the current time there are also financial products available where you can build your emergency fund while having the peace of mind that you are insured.

 

Below are some of examples of Philippine savings account with free life insurance:

 


 

BPI Save Up + Insurance

Initial Deposit to Open an Account – Php 0.00

Required Minimum Monthly Average Daily Balance (ADB) – Php 1000.00

Features:

You can transfer as low as P250 to start saving in your Save-Up account.

Get additional accident insurance worth 5x your average account balance, up to PHP 2 Million.

Get free life insurance worth 5x your average account balance, up to PHP 2 Million.

You can monitor your account through BPI Mobile App or BPI Online.

 

If you want to learn more about BPI Save Up + Insurance, you can read my post here.

 

Security Bank All Access Account

Initial Deposit to Open an Account – Php 25,000

Required Minimum Monthly Average Daily Balance (ADB) – Php 25,000

Features:

No medical required plus immediate insurance coverage upon approved enrollment.

Life insurance of up to 3x your account’s year-to-date ADB up to Php 3 million.

Accidental death benefit equivalent of your ADB up to Php 3 million.

Includes Terminal Illness benefit equivalent to your life coverage up to Php 2 million.

Up to Php 25,000 fixed amount as sudden funeral expenses.

 

BDO Kabayan Savings Account

Initial Deposit to Open an Account – Php 100.00

Required Minimum Monthly Average Daily Balance (ADB) – Php 25,000

Features:

Life insurance amounting to 50% of ADB and 50% of total remittance for the past 12 months up to Php 1 million.

For accidental death, 50% of ADB and 50% of total remittance for the past 12 months up to Php 2 million.

 

CIMB Bank UpSave Account

Initial Deposit to Open an Account – Php 0.00

Required Minimum Monthly Average Daily Balance (ADB) – Php 5000

Features:

No medical check-up required.

Life insurance amounting to 1x coverage of the average daily balance in the last three calendar months of the depositor, up to a maximum coverage limit of PHP250,000.

Or if the Eligible Member’s UpSave account has been active for less than 3 months, the computation of coverage will be 100% of the client’s UpSave account’s latest balance divided by 3, up to a maximum coverage limit of PHP250,000.

Coverage is renewed on a monthly basis subject to depositor meeting the requirement of minimum PHP5,000 average daily balance.

 

RCBC iSave

Initial Deposit to Open an Account – Php 0.00

Required Minimum Monthly Average Daily Balance (ADB) – Php 0.00

Features:

Personal Accident Insurance and Hospitalization Benefit.

No specified amount provided in the website.

 

UnionBank Savings+

Initial Deposit to Open an Account – Php 0.00 Required

Minimum Monthly Average Daily Balance (ADB) – Php 25,000.00

Features:

No medical required plus immediate insurance coverage upon approved enrollment

Life insurance of up to 3x your account’s year-to-date ADB up to Php 3 million.

Accidental death benefit equivalent of your ADB up to Php 3 million.

Includes Terminal Illness benefit equivalent to 50% of Basic Life, maximum of Php 1.5 million.

Up to Php 25,000 fixed amount as sudden funeral expenses.

 


 

The greatest benefit of opting a saving account with free insurance is that you get the most out of your limited money.

 

Opening a savings account with insurance help you maximize what you can can afford at the moment. If have limited amount you can save from your income but would want to feel insured then this is a good option. Instead of your money just sitting in the bank, why not maximize it with insurance.

 

Now, do mind that the insurance amount you’ll get is limited in this option.

 

Unlike opening a term life insurance, the amount your beneficiaries will get depends solely on how much is your average daily balance in the last three months. Thus, you need to save more should you want your beneficiaries to get the right amount of coverage they’ll should something bad happen to you.

 

For example, one of the above Philippine savings account with insurance provides life insurance of up to 3x your account’s year-to-date ADB up to Php 3 million.

 

If you only have Php 25,000 as your year-to-date ADB and you suddenly died, there’s only Php 75,000 for your beneficiaries. Would the said amount enough for your beneficiaries?

 

Final notes from SavingsPinay

Thank you first and foremost to our reader question of the month. There’s much debate over emergency fund and life insurance and what one should prioritize first. Always evaluate your options.

 

I do encourage you to send any budget, savings, investment or making extra income question you may have so I can answer through a blog post. You can send it via DM or email at izza@savingspinay.ph.

 


 

Clariza Glino

Izza of SavingsPinay helps Filipinos bridge the financial literacy gap one content at a time by providing insights and tips on budgeting, saving, investing, side hustle and growing your net worth. Aside from this blog she also writes at www.izzaglinofull.com, a beauty and lifestyle blog for frugal Pinays and manages, www.izzagevents.com, a wedding and event business since 2011. For inquiries, topic suggestions or future collaborations email her at izza@savingspinay.ph

[ssba]

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>