What is the difference between a PRE-NEED and a LIFE INSURANCE? The most frequently asked question before buying a LIFE insurance
“Baka katulad yan ng CAP, baka bumagsak din ang kompanya na yan.” One of the most common remark or question I have heard in life insurance industry.
I don’t blame people from thinking that way, since, I, myself, was a victim of pre-need education plans before. But since now that I know better, what I do is to educate people the best that I can. But before jumping to any conclusions, I would like to help in educating the public. The difference between “life insurance companies” and “pre-need companies.” Here are several points to consider:
t is important to observe what is “open-ended plans” means.
If we are to trace back our country’s history. Do you remember the regulation of petroleum in the country? Do you remember that before 1992, oil was regulated by the government? Meaning, petroleum companies that time were being controlled by the government? When only Shell, Caltex and Petron existed that time? Then 1992 came, “regulation” becomes “deregulation” meaning prices are now not controlled by the government.
If you remember now, not only oil/petroleum was regulated, but also, education (tuition fees), health care system, shipping industry and many others.
The PRE-NEED industry now became in trouble. Since they have an “open-ended plans” – they made their promises (education tuition fees) before the deregulation begun. Tuition fee skyrocketed and continues to do so until now, with around 10-15% annual increase. To add up to the existing problem, the pre-need industry did not stop at selling open-ended plans even after the deregulation begun. As a consequence, pre-need companies begun failing in fulfilling their promises.
I, too, was a victim of the circumstances that time. My mother got an education plan for me (pre-need company) and when it was time for my college, they just gave 10,000 every school year. From previously promising whatever the prevailing tuition fee that time.
Although differences do exist between the two industries, both can mutually work together to serve the financial needs of an individual person in terms of protection, savings, and wealth conservation. What is important to consider is the capacity of these companies to uphold good governance, and to handle their operations well in a manner that protects above all, the interest of their policy holders.
I am not saying it is not good to get a preneed plan nowadays, but be aware of an open-ended offers. And make sure the company you are dealing with is trustworthy. I hope this post will clear up questions in the mind of the public. This link will show a list of distressed preneed firms and pre-need companies that are slowly disappearing. And after reading this post, I know now, you are educated.