Is Your Insurance Coverage Really COMPREHENSIVE?

By Daxim Lucas
Philippine Daily Inquirer
First Posted 19:03:00 09/28/2009

Filed Under: Consumer Issues, Disasters (general)

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MANILA, Philippines -- Amid the damage caused by floodwaters to hundreds -- maybe thousands -- of vehicles by typhoon “Ondoy” (international codename: Ketsana), auto insurance firms are bracing for a deluge of claims from policyholders over the next few days.

Yet, vehicle owners who think that a “comprehensive” automobile insurance policy would insulate them from further financial losses may be in for a nasty surprise.

According to officials of insurance firms, only the claims of policyholders who availed of additional coverage against “acts of God” or “acts of “nature” can expect to be reimbursed for the repair or replacement of their cars.

Emmanuel Que, executive vice president of the Philippine Charter Insurance Corp., said many clients did not avail of insurance coverage for "acts of God" or nature.

“Normally, if you have coverage for acts of God, [repair for] flood damage would be covered,” Que said. “Unfortunately, this is not something clients normally avail of.”

He explained that, in most cases, people who availed of automobile insurance paid only for policies that covered normal vehicular accidents, “own damage” or theft.

“Those are the more popular ones,” he said, adding that few vehicle owners even considered so-called policy “riders” for acts of God because of the sheer rarity of these incidents.

“With ‘acts of God’ policies, a car owner will be protected against damage caused by typhoons (which includes flooding), earthquakes or anything induced by nature like a falling billboard or a falling coconut,” Que said.

But the insurance cover does not come cheap, averaging about 0.7 percent of the vehicle’s insured value per year.

For a P1-million car, this would translate to an additional P7,000 in insurance costs, on top of the P28,000 comprehensive annual premium for brand new units.

As early as Monday morning, auto insurers have already been getting calls from clients indicating the impending filing of insurance claims.

“Right now, we’re getting a lot of notices of loss,” said UCPB General Insurance Co. Inc. claims head Francis Nob in a telephone interview. “What [clients] are saying right now is that they intend to file a claim.”

“What will happen next is that our assessors will check our records if they have policies that cover flood damage,” he added.

He pointed out that policyholders who bought additional coverage for “acts of God” can expect immediate action, but those without this may be in for more heartache.

“If they have none, we will politely tell them,” Nob said, acknowledging the difficulty of breaking bad financial news to clients who may have lost all their belongings in the flood.

Even as he noted that few clients have actually availed of acts of God policies, he said his firm has already notified auto dealerships and accredited repair shops to expect a flood of clients to have their vehicles repaired.

Even those who had enough foresight to avail of “acts of God” coverage, however, will have to make do with a repaired vehicle instead of expecting insurers to replace their cars with new ones.

“The liability of the insurer is to restore unit to its condition prior to damage,” Nob said. “The insurance firm has the right to restore it.”

Echoing this position, Philippine Charter Insurance’s Que said repairs on flood-damaged vehicles would normally revolve around replacing damaged interiors and restoring electrical systems -- repairs that could cost insurers about P50,000 per vehicle.

“If the car’s computer box has been damaged, that would cost maybe an additional P50,000,” he said. “The important thing is that one should not try to start the [flood-damaged] vehicle. As long as you don’t try to start it, it can be repaired.”

UCPB’s Nob does not expect a sharp increase in claims payouts for auto insurance policies.

He noted, however, that insurance firms may have to adjust their rates henceforth, now that the “unlikely” event of massive flood damage around Metro Manila has become a reality.

“We may see higher premiums in the future,” he said. “This event means a lot to the industry as a learning

Metro Manila Hit by Flooding- Emergency Funds and Protection

Broadcast Media and Broadsheets has splashed the devastation Ondoy brought to Metro Manila, Rizal Provinces and NCR. Many got caught flat footed and not prepared or ill prepared at the least .

One of our members, Kaye Soriano got stranded in QC for a day . Her car was engulfed by the floods. She was with another IMG Member Flash with his wife Diane Obejero. They attended a birthday celebration.

This phenomenon blamed by some to climate change is a perfect twist in life that we got to be prepared for.

Surely the cars, properties, and life lost and damaged by the flooding will be mitigated if all were properly insured.

For those who sustained manageable damage, this is where Emergency Funds can kick in.

Thus, we indeed need to be always fully prepared by having ample insurance protection, and enough emergency funds.

This is what we preach and do in IMG for we'll never know what will happen next.

Praise God those of us who were spared. Praise God those of us who are prepared!

Can you really get more than 12% ROR

Yes ! We can make more than 12% and it's safe.

But, of course you have to have the proper guidance and coaching.

Our record to date is 22% for our Mutual Fund investments and 76% or our Stocks investments inclusive of 20% Stocks Dividends.

Believe it or Not?

Of course, there is no guarantee as I have expounded on earlier blogs regarding these kinds of investments.

If you want to learn more, read on with my blogs...

Happy Investing

When, Where, and How to Invest

The finals step is the execution... Just where? When? How do we let go of our hard earned money to the chosen fields of investments?

Earlier, we tackled the first two steps (Education and Investment Plan) which is a prerequisite to this final step with major consideration on the basic foundation of your financial plan: Protection and Long Term Health Care, Emergency Fund Build Up , and Debt Management.

Again, do not venture into investing unless you are clear with the first two steps. It's suicidal and certainly not much different to betting your money on a game of chance.

With that said and laid out, you are on your way to the final steps.

So WHERE do we invest? Key to investing is DIVERSITY. Make sure your chosen fields really do match up with your timing and risk capability. The younger you are , the higher risk you can take and investing on Stocks is a good avenue for your major investments. If you are in the age range of 40-50 you might need to have partly stocks equity and partly more secured funds or more liquid funds. If you are in the above 60 range, you need to be more conservative in your investments like mutual funds, government issued security bonds.

Note, putting money as savings deposit in the bank is not a wise investment. It's a sure loss.

Other investment opportunities are Real Estate, Food Cart, Franchising, etc.

In all of these, you have to make sure you are in the know and has a coach till you gain confidence in your capabilities.

After knowing where to invest, you need to make sure there is constant build up of your investments. You need to let go of your cash into your investments. Start small and then regularly build up your investments. Match the timing with your cash flow. You will note that the earlier you start with this, the lesser amount of money you will need to constantly flow in to your investments. Thus, do not procrastinate... just do it.

In stocks investing, there are two school of thoughts: Money Cost Averaging and Trading. The former is for beginners and the latter is for those who has gained knowledge and experience. So timing for the former is a regular constant flow. While the latter timing is wait and see, analyze and move. This is very stressful and thus I will even consider dangerous to your health specially if you have a heart condition.

There you are, the basic overview of investing. If you would like to know more details and want to be coached, please feel free to contact us.

God bless.

Plan to INVEST- Second Step

Education is a pre-requisite to informed and intelligent investing.

Get this from competent individuals and or investment companies. We can recommend Citisec On Line (COL), Rampver Strategic Advisers, IMG for this. We can personally help you out.

Let's now proceed with our second step: Define your Investment Goals.

Investment Goals are expressed also in amount and time and purpose. For example, you want to invest money to go on a Marian Pilgrimage by 2010 October and your investment period start this month. So you exactly know you have 13 months to go, and the cost of the tour is about 200K per person.

If you are thinking 13 months, this is still on the short term.

Another example is investing for your retirement. If you are 35 years of age and you want to retire when you are 50 and your target is 5 Million, you have 15 years to do it. This can be considered as long term investing.

Define all your purposes or reasons to invest and plug in how much you will need by what date. Go back to your goals.

Next step is to define where you will invest your money on the next blog...

Plan to INVEST- First Step:EDUCATION

Investing is the most exciting but most demanding part of financial planning. It requires much careful study and needs thorough understanding of different risks and returns considerations. We have to go through much needed education.

Thus, the first step to investing is getting education on the rudiments of investing. Before we even dabble in investing, we need to make sure you really know what we are getting into.

We can liken this to diving into a pool. Would you dare jump into it , if you do not know yet how to swim? Certainly you'll drown unless you know how to swim. Same with investing.

We also need to make sure that the basic foundation of your financial plans had been laid out. These were discussed in earlier blogs: Increase Cash Flow, Plan for Protection, Create Emergency Funds, and Eliminate Debts. Only after these had been laid out should we even talk about investing.

We also need to make sure we know our competencies and passion that we will match up with our investment avenues. Are we business oriented, do we have the knack for money markets and stocks/equity investing? Do we have the needed tools and facility to do it? Does our mental and physical capabilities match up with what investment we want to pursue?

We must also do thorough study of the companies we will invest our money into. We need to do research and the most convenient way is through the internet. So many people are duped by high rate of returns that eventually turns out to be scams.

We also must make sure we are diversified. We must not put all our eggs in one basket as the proverbial saying goes.

Another thing we need to know and learn are the different avenues where we can invest. These are several available opportunities: 1. Franchising either a consumer goods, food cart, or fast food store, 2. Buy and sell of real property or vehicles, 3. Sari sari Store, 4. Cooperatives, 5. Mutual Funds, 6. Stocks/Equity Funds, 7. Condo or Apartment Rental Business, 8. IMG Business.

We can group all these investment opportunities to three major groups : 1. Real Estate, 2. Paper Assets, 3. Business. These will generate Rental Income, Interest on Investments Income, and Rate of Return on Business Investments.

I can say we know much of the rudiments of most of the mentioned investments for we do involve ourselves on it. We have rental income from our condo and apartment, we have investments in mutual funds and stocks equities, we have investments on cooperatives, and we do have our IMG Business.

I can't cover the complete details of investing in this blog. However, our company provides the needed education for investment opportunities on well refuted companies. We can show you how your money can work for you, and make you your own financial adviser. We can give you all your needed information so you can make a wise decision on where you can invest considering your financial goals, your risk capability.

We must not embark on our INVESTMENT PLANS till we complete this first step: EDUCATION....

Will proceed with our Planning for INVESTMENT next blog....

Getting Out of DEBT

If there is any school that would grant us PhD in Debt Management, I think we would qualify and even get a Suma Cum Laude for it. Thus, I assure you, we know what we are talking about when we say getting out of the Debt Trap can be done.

You see, both me and my wife Fely are earning good with salary of 6 figures . However, we were really not keen in managing our finances prior to our IMG enlightenment. Thus, our debts and loans from our many credit cards and different loaning facility runs to more than 7 figures.

Now, do I get your attention?

This problem of living on borrowed money or debts affects so many millions of lives or perhaps billions world wide. In the latest blog I read about Philippines Credit Card debts, it runs more than 120Billions of Pesos. I am sure you who is reading this blog right now has some contributions to this enormous debt plaguing our society.

Mind you, this is not isolated to the poor sector of society. This engulfs even those in the higher income bracket of our country. My relatives abroad are not spared from this. I am sure you do hear the same stories from your relatives abroad.

Loans and Debts makes people do things that lead them to more problems. Some even resort to taking their own lives to escape the grip of debt... passing their problems to those they leave behind.

However, solution to this perennial issue just require a plan.

The first step is to STOP BORROWING. You need to define a firm start date of when you will put an end to borrowing. The best start date is NOW!

Second step is to list all the existing loans you have and line it up with the amounts and interest the loans has. For example:

1. Citibank 100K 3.5%/month
2. Housing Loan 600K 1%/month
3. Coop Loan 150K 0.75%/month

Then, define when you will pay off these loans prioritizing payments to the one which has the greatest interest.

You may even resort to transferring all your loans to the one that gives you the least interest payments.

Do not fall into the trap of loans re-structuring to lengthen payments as this means you are prolonging your loans and enabling the loaning institution to continue to charge you with more interest.

Plan to pay more than what the required minimum payment is.

Pay off whatever extra money you have from your emergency funds. Bonus and 13th month pay must be allocated for your debt payments.

When your cash in-flow increase, make sure you use it to plug into the high interest paying debts.

As you do this plan, make sure you keep yourself in the company of people with the same desire and discipline.

Following these simple steps, we were freed from the bondage of debts and are now debt free! I'm sure you can do the same.

For more detailed Debt Management Plans, you may consult with us in our office in Dasma or can send us emails.

Would appreciate your response to this blog.

God bless.

Will tackle the exciting world of INVESTING next blog....

Planning for EMERGENCY FUNDS

Most people simply do not allocate funds for emergencies like having to repair a leak in the roof, or getting the car fixed and many other emergencies, like temporary loss of job or pay cuts which are very common these days.

There are so many emergencies that happen and the sad thing is that people fail to prepare and save for these emergencies.

In your financial planning, this EMERGENCY FUND build up must be a priority over debt repayments and investments.

Target date for this fund must be made earlier than the former. From the Cash Flow you generate each month, build up at least 3-6 months equivalent amount of expense for this fund. For example, your monthly expenses is about 15,000 Php, then you need to have at least 45-90K of emergency funds.

You have to make sure you put this fund as liquid and as easily accessible as possible. You may use your ATM Bank account for this purpose.

Do not invest this money on jewelries or anything you can pawn as most Filipino overseas workers do. This is a BIG mistake. I repeat, BIG mistake. If you do, you lose two times. First on the value of your money, and second on the interest the pawnshop will charge you.

If you are just newly weds and is planning to have a child, include in your EMERGENCY FUND build up the expenses you will incur in having your first baby. Normally , this is divulged by your OB.

If you fail to build this fund, you will always resort to borrowing and therefore wont be able to get out of DEBT.

That is our next blog.

God bless.

Planning for PROTECTION

The foundation of any Financial Plan is PROTECTION for your family.

I am sure you have heard the phrase: "everyone dies and is not exempted from dying, we just don't know when". This is very true and yet, we do not take this seriously in our plans. We normally avoid this topic specially for us who are afraid of death.

But this is a reality we have to face. It's quite perplexing for us to say we love our family more than anything in this world, yet, we do not provide ample protection for them. We usually would make sure all our properties are properly insured but we often neglect to insure ourselves who are bread winners of the family

The insurance protection we get is akin to a spare tire of a car. We have it ,but it would be nice not to use it. But in case we need , it is there conveniently available to us.

Protection is a very minimal investment that can provide the same peace of mind , just like that of a spare tire.

So how exactly do we plan for it?

The methods used are:

D- ebt payment (amount of loans that you have)
I- ncome replacement ( 10X Annual Income)
M- ortgages (amount of mortgaged loans)
E- ducation (projected cost of education for children)

For those who have acquired much assets and are in their 50's, we recommend:

H- ealthcare (how much care you plan to have in your retirement)
I- ncome replacement
D- ebt pament
E- ducation
E- state Plan

Just plug in the amounts and get the total sum. Obtain the appropriate insurance coverage that will meet your needs.

If you have already some investments, you need to subtract this from the total sum and then find out the appropriate insurance plans.

The earlier you get this, the easier this will be on the budget as most insurance plans are dependent on age of the insured.

Our mistake is that we relied on the insurance package our previous employers provided. As you know, the company insurance protection is co-terminus with employment. If you are no longer employed by your company, you are no longer covered and yet it is at that stage where you have worked for some long years that you would really need such protection.

Another mistake you need to avoid is on Long Term Health Care. Like life insurance, health cards are provided by companies but they only last while you are employed. When you are young and able to render service, normally , your body is still strong and do not need much care. However, when you retire, that's where you would mostly need health care. Thus, prepare for it while you are young.

For expert advice we can provide this to you. Just contact me at: richbenj.santiago@gmail.com

God bless.

Our next step is to plan for Emergency Funds.

Let's do the PLAN- Increase Cash Flow

Goals are set earlier and if we do not do any planning how to get it, we wont! Or, we get there with extreme difficulty and hassles.

It's just like planning a trip to Baguio, and you just went without any plan.

How do you start?

With the Goals set, you will define the specific actions you have to take to achieve them. Let me tackle how to come up with plans for each specific goals you have set.

First goal to plan for is How to Increase Cash Flow. Cash Flow put is simply the difference between Income and Expense. So your Monthly Cash Flow is the amount of money you end up with each month after you have deducted all your expenses from your income.

Thus, there are two ways of increasing Cash Flow. We either reduce our expenses or we increase our income.

Let's focus on the Expenses first. This is easy to do as long as you would be willing to adopt a disciplined approach to your spending. This is also where you need to involve the entire family. From the list of expenses you incur daily, weekly and monthly, check what is your biggest expense and determine why you are spending that much and how much you can save

In our own Cash Flow checking, we see that our biggest cost item is our groceries, followed by utilities which includes (water, electricity, and Fuel for car).

For the electricity, we made sure that we turn off lights and appliances that are not in use. So, there you are, the plan is to trun off the lights and electrical appliaances not in use. Action to be taken - IMMEDIATELY. We also bought an electric power saver. So, plan number two was buy an electric saver . This reduced our electric bills by about 5-10%. Monthly bills that amounted to about 5000 pesos now range to about 4500 or 500 pesos monthly savings.

Our water consumption was way out versus standard consumption. We pay about 2500 Php per month. I analyzed the problem and found that there was a huge leak in our waterline. I had to re-pipe our lines and cost me about 10000 Php to do it but saved me 1800 Php which will return my 10000 in less than a year and would eventually increase my monthly in-flow of cash rather than continue to leak out my money to the drain literally.

Groceries was a little bit difficult to approach specially if you have children who are used to simply put anything and everything in your grocery cart each time you go shopping. When we started to reduce grocery expense, it put some stress within me as I want to be a good provider for my family, but at the same time, I want to get our finances fixed. This is where the discipline comes to the forefront.

For your own expense reduction plan, use the Cash FLow Worksheet and see what your biggest expense itmes and from there define your own action. Each one of us have unique needs and therefore will have varying itmes for reduction. But, the same principle applies, you jus need o find out the appro[priate actions which would have to involve your family as well.

The next plan you need to define is how to increase your income. For some of us, our income streams are primarily from our jobs. We work and get paid every end of each week or every 15th day or every 30th day of each month.

Working to get paid is the easiest way of assured income but not necessarily the surest way to riches. To increase income, you need to have two make full use of two improtant resources: Time and Money.

Time is also spent. If you spend it wisely, it give you return. If you waste it, you even end up wasting money in the process. Thus, for us to increase our income, we have to use wisely to the max our time. How do we use our time wisely?

1. Use your time to increase your knowledge. Knowledge is power.
2. Use your time to create your own business and earn passive income .

To increase our knowledge, we need to read books, search the internet, or attend seminars that will give us financial literacy. Obtain the much needed information you need to be able to save and invest properly. You'll be surprised, there are internet sites and seminars that are free.

For our case, we attended seminars and read books of Bro Bo Sanchez. We also read through internet blogs , and many readings. We also attend continuing education from our company IMG.

As we learn, we also earn. In our company, we are able to provide free seminars to people who want to change their financial life. In the process of learning, we also give opportunity to build their own business.

So that is our first part of planning.

Next will be how to plan for Protection.

God bless!