If you’re good at stock market investment, would you still need a life insurance?

Disclaimer: Everything I’ve written below stems from my own perspective based on personal experience with stock market investment and from trainings I’ve attended to become a licensed financial adviser.

As financial adviser, trained by one of the industry’s best mentors out there, it worries me every time a client would refuse my offer of insurance just because he believes he has the “expertise”for stock market investment. It is my job as financial adviser to conduct a thorough interview with client about his/her financial status, priorities in life, and budget. I’ve only been in the insurance industry for a year but in such a short span of time, I’ve already encountered potential clients who sadly refused to get protected through insurance simply because they chose to invest their money in high risk investments such as the stock market.

Don’t get me wrong. I do know how easily one can earn money in the stock market if you have the time and dedication to actually study and practice. I started investing in the stock market back in 2010 when Jollibee was still selling at 179 per share and the index was around 4,000. I also DO KNOW how easily you could lose money in the stock market. As geologist, I was one of those people who hastily invested in mining companies especially those with good reputation and whose tenement area/s are promising based on my professional assessment. 9 years after, I’ve lost money in the penny stocks, mining companies, but did gain some in Jollibee, Metrobank, and other stocks. I’ve also learned how it works from reading books, articles, and listening to my stock market trading mentor back then. Despite due diligence, I still lost some money in “basura” stocks due to poor strategies and “shoot in the dark” way of trading. I was also easily swayed by “word of mouth” from well-meaning trader friends, when choosing stocks to invest in. If there is one thing I’m NOW sure of, investing in the stock market is most of the time, a gamble. You only lessen the risk of losing money by studying it extensively, and at the micro and macro (global) scale. And no, you don’t learn it overnight after reading one of two books by famous authors. Studying how the stock market works takes so much time, dedication, patience, plenty of cash, strategies, constant reading of business articles, and experience to become good at it. If you have time to seat down on those things, congratulations. But if you are an average employee whose time is divided between dealing with Metro Manila traffic, competing in the corporate rat race, and whatnot, then it might take you a while to learn the ropes. Stock market investment is not a walk in the park. Otherwise, 70% or more of the population would be millionaires. Such is not the case, however.

So when a client told me that he earned his first million investing in the stock market, I offered him my heartfelt congratulations. Then I asked him, over coffee, casually, “So how much is your insurance coverage?”

He looked at me and slowly told me, “I’m not insured.

Sensing my shock, he hastily added, “I’m confident that when I die, which I’m sure will be decades from now, I’d be immensely rich, my kids will have enough money from my investment. I’m healthy, nothing’s gonna happen to me.”

I was taken aback. I live in a city and ply the Metro Manila roads on a daily basis, and thus, have seen accidents that were so bad, I was pretty sure the person/s involved died. Getting into an accident or contracting a deadly disease is not a matter of IF but of WHEN. However, I was not about to scare my client by telling him that.

So here’s the question asked by the same client, ‘If I consider myself good at stock market investment, tell me why I would need to get the VUL you are offering me right now.”

So I made a list of good reasons why getting insured is a must, whether you are an average Juan or a stock market rock star:

1. Investing in the stock market alone and not in other money instruments will be like putting your eggs in just one basket. What if your only basket drops?
2. When a critical illness strikes, and you are not aptly protected, if at all, you have no choice but to withdraw your investment funds for hospital expenses. If you are investing in the stock market to grow your kids education fund, for example, you could easily lose that fund over a single disease. Do you know much we spent on dad when he got hospitalized due to chronic kidney disease brought about by diabetes? More than 1M in professional doctors’ fees alone. The main advantage of being insured from life, critical illness, and accident and health, which is a typical VUL package, is that when illness or accident strikes, there would someone else who will take care of your expenses, so you won’t need to pull out your money from your investments. That someone is your insurance company.
3. My company, Philam, ensures expert management of your hard-earned money, plain and simple. If you don’t have the time and expertise to invest your money, Philam’s fund managers will take care of your money for you by investing it to your chosen fund: equity, balanced fun, dollar fund, bond fund, your choice, really. Does it cost a lot to have your funds get managed by experts? No, not really. Again, as financial adviser, my job is to make sure you invest within your means or budget. You only invest what you can invest. Plain and simple.
4. If you’re that good in investments, you can outperform our funds in Philam but you can also lose money in the stock market because you don’t have any control over factors that affect the global market. Are you even willing to gamble your kids’ education fund or your future retirement fund in the stock market? You should have a backup plan.
5. Death is not a matter of if but when. No one is immortal. When you die, what your family will get is the value of your stocks at the time of your demise. What if the stock market index was down? You also only get your capital plus returns. Whereas, when you are insured, if your policy states that you will get 10M at the time of your death, you will get 10M even if you have only been paying your insurance premium for only two years. You are actually insured from Day 1 of your policy’s date of effectivity.

Also of noteworthy is that most financial advisors I know are so good at stock market investments. My stock market mentor is a rock star where money market is concerned, yet he chose to also secure his family’s future with insurance companies he trusts. Personally, I’m covered for critical illness, accident, and life, as well as currently building my retirement fund. I’m saving my money automatically monthly and yearly through auto-debit arrangement with my bank so that whatever’s left in my bank account I use to pay for my bills and for emergency fund.

My client decided to get VUL product from me after giving him a short presentation on How to Retire Rich and Healthy. Philam’s VUL products are customizable according to a client’s need, priorities, and budget.

Book a financial planning session with with me by sending me a message at my Facebook/Messenger account: Grass Collantes.