Consumer Credit - Final Exam Reviewer PDF

Consumer Credit Credere = to believe Generally means to allow delayed payment Credit is used to purchase goods and services, to finance living expenses, or to make payments more convenient by delaying them for a relatively short time. Nonbusiness debt used by consumers for expenditures other than...

Consumer Credit Credere = to believe Generally means to allow delayed payment Credit is used to purchase goods and services, to finance living expenses, or to make payments more convenient by delaying them for a relatively short time. Nonbusiness debt used by consumers for expenditures other than home mortgages (Garman & Forgue; Personal Finance) Consumer credit is personal debt taken on to purchase goods and services. A credit card is one form of consumer credit. Usually used to describe unsecured debt that is taken on to buy everyday goods and services. Extended by banks, retailers, and others to enable consumers to purchase goods immediately and pay off the cost over time with interest.  Consumer Credit Installment Credit Revolving Credit typically issued by one vendor for a specific purchase extenwds the ability to delay payment for different items from different vendors up to a certain limit Payments are made until that amount is paid for. popular for the purchase of consumer durables risk of nonpayment Trivia: Frist modern credit card was Interest BankAmericard (1958) Merchants worldwide accept credit cards as a method of payment because the issuer (the bank or finance company) has assumed the default risk by guaranteeing the merchants’ payment. convenience and security. Credit set by the lender and is the maximum Limit! outstanding debt allowed on the credit account Individual Finance (Sigel & Yacht)  open-ended account at a financial institution that allows the holder to make purchases almost anywhere A credit card is a thin rectangular piece of plastic or metal issued by a bank or financial services company, that allows cardholders to borrow funds with which to pay for goods and services with merchants that accept cards for payment Common Credit card Problems and Solutions You Can’t Afford Your Payments Credit Card Declined You Have a High Annual Fee shopping spree Exhausted credit line too high of an annual fee Late payments Fraudulent Transactions -Ask them if they’ll waive the annual fee -Don’t stop making your payments -get in touch with your card issuer -canceling your card -cut back on your monthly expenses -card with no annual fee. -live within your budget https://creditfast.com/common-credit-card-problems-solutions/ Common Credit card Problems and Solutions Your Pay Day and Credit Card Due Date You Have Late or Missing Payments Are at Odds This will cause your credit score to fall -You can call your card issuer and ask if they can move the due date -set up email and text alerts -Match due date with your payday -set up electronic payments You Let Someone Use Your Card, and They’re Not -As long as you have money in your Paying the Balance account to cover the bill, you won’t have to worry about it. Your credit card is in your name, and you run a risk each time you let someone use it. You will be stuck with the balance, not your friend or family member  Creditworthiness Capacity: Can You Repay Your Debts? Character: Are You Responsible? ability to repay a loan with present income trustworthiness and reputation Conditions: What Else Is Going On? overall economic climate and external environment. Capital: Do You Have Sufficient Assets? Collateral: Is the Debt Secured? less likely to default on payments property pledged to assure repayment of a loan Ryan & Ryan : Managing Your Personal Finances Before Buying a Car Choosing a car Research! Affordability Amount of down payment Size of the monthly loan payment you can afford Review your budget! Bring your trusted mechanic when buying a car He will give you valuable advice Think of its resale value Car value depreciates Cost of Owning a Car Initial purchase price Financing costs and interest over the life of the loan Registration and title costs Emission inspection Insurance Scheduled maintenance Storage or garage spaces Cost of Operating a Car Unexpected repairs Gasoline, oil and fluid and maintenance Tickets Parking and tolls  Housing – the Cost of Shelter The Down Payment Most buyers finance a major part of the purchase price of the home, but they’re required by lenders to invest money of their own, called equity. Mortgage Payments/Loan Fixed-rate mortgage. The traditional type of mortgage in which both the rate of interest and the monthly mortgage payment are fixed over the full term of the loan. Adjustable-Rate Mortgages (ARMs). A mortgage on which the rate of interest, and therefore the size of the monthly payment, is adjusted based on market interest rate movements. Property Taxes and Insurance Taxes levied by local governments on the assessed value of real estate for the purpose of funding schools, law enforcement, and other local services. Insurance that is required by mortgage lenders and covers the replacement value of a home and its contents. Maintenance and Operating Expenses Maintenance costs should be anticipated even on new homes. Painting, mechanical and plumbing repairs, and lawn maintenance, for example, are inescapable facts of homeownership. Such costs are likely to be greater for larger, older homes. Benefits of Owning a Home Market Value The market value of a home is the highest price that the property will bring on the market. It generally means what a ready and willing buyer and seller would agree upon as the price. Appraised value Real estate appraisers can prepare an appraised value by examining the structure, size, features, and quality as compared to similar homes in the same geographic area. Quality of Life Homeowners generally have more privacy and larger living and storage space than renters have. Homeowners also have more personal freedom. In your own home, you are able to redecorate or remodel to accommodate your own needs and personal style. Owning a home also provides a feeling of security, stability, and independence.  Should you RENT? Renting is the process of using another person’s property for a fee. Landlord is the owner, or owner’s representative, of rental property. A person who rents property is called a tenant or renter Advantages of Renting Flexibility. If you have a short-term or month-to-month lease, you have the flexibility to move if you need to once your lease is up. Lower cost. Renting is usually cheaper than the cost of buying a house. Sharing expenses with roommates lowers individual costs even more. Fewer responsibilities. Renting usually relieves you of many of the responsibilities of home ownership, such as costly repairs and maintenance. Amenities. Many landlords provide a number of amenities for their tenants. Convenience. Rental units are often located in close proximity to major shopping areas, public transportation, and area businesses. Social Life. Apartments offer the opportunity to meet others and socialize informally, especially where recreational facilities are provided. Disadvantages of Renting Noise. Residents usually share common walls with neighbors above, below, and/ or beside them. Consequently, music, conversations, and other activities of neighbors can be overheard. Lack of privacy. Because conversations and other activities can be overheard through common walls, tenants often feel a lack of privacy. Small living and storage space. Unless you are renting a house, you will have a smaller living space. Scarcity of parking. Many rental properties do not provide garages or off street parking. Investment Planning Investment planning is the process of matching your financial goals and objectives with your financial resources. It is also a process that begins when you are clear on your financial goals and objectives. The financial planning process is designed to help you get clear on how to match your financial resources to your financial objectives Investment plan A statement—preferably written—that specifies how investment capital will be invested to achieve a specified goal. Investing The process of placing money in some medium such as stocks or bonds in the expectation of receiving some future benefit. Taking some of the money you are saving and putting it to work so that it makes you even more money. Are You Ready to Invest? Here are signs you are ready to begin an investment program: You balance your budget You are able to save regularly You use credit wisely You carry adequate insurance Financial Market A market where buyers and sellers trade commodities, financial securities, foreign exchange, and other freely exchangeable items (fungible items) and derivatives of value at low transaction costs and at prices that are determined by market forces. The money markets, where large-scale, short- term debts are arranged, and capital markets, where longer-term debts are traded, make up the financial market. Financial Institution is a company engaged in the business of dealing with financial and monetary transactions such as deposits, loans, investments, and currency exchange. Financial institutions encompass a broad range of business operations within the financial services sector including banks, trust companies, insurance companies, brokerage firms, and investment dealers. Types of Financial Institutions Financial institutions offer a wide range of products and services for individual and commercial clients. The specific services offered vary widely between different types of financial institutions: - a type of financial institution that accepts deposits, offers checking account services, makes business, personal, and mortgage loans, and offers basic financial products like certificates of deposit (CDs) and savings accounts to individuals and small businesses. Investment Banks specialize in providing services designed to facilitate business operations, such as capital expenditure financing and equity offerings, including initial public offerings (IPOs).  Insurance Companies among the most familiar non-bank financial institutions are insurance companies. Providing insurance, whether for individuals or corporations, is one of the oldest financial services. Protection of assets and protection against financial risk, secured through insurance products, is an essential service that facilitates individual and corporate investments that fuel economic growth Brokerage Firms Investment companies and brokerages, such as mutual fund and exchange-traded fund (ETF) provider Fidelity Investments, specialize in providing investment services that include wealth management and financial advisory services. They also provide access to investment products that may range from stocks and bonds all the way to lesser- known alternative investments, such as hedge funds and private equity investments. Most frequent investment Objectives/ Goals Enhance Current Income The idea here is to put your money into investments that will enable you to supplement your income. In other words, it’s for people who want to live off their investment income. Save for Major Expenditures People often put money aside, sometimes for years, to save up enough to make just one major expenditure: The down payment on a home Money for a child’s college education Some capital for going into business An expensive (perhaps once-in-a-lifetime) vacation The purchase of a special, expensive item Funds for retirement (discussed in the next section) Accumulate Funds for Retirement Accumulating funds for retirement is the single most important reason for investing. Review the amounts of income you can realistically expect to receive from Social Security and your employee pension plan, and then decide, based on your retirement goals, whether they’ll be adequate to meet your needs. Different Ways to Invest After establishing your investment objectives, you can use a variety of investment vehicles to fulfill those goals. Common Stock Common stocks are a form of equity—as an investment, they represent an ownership interest in a corporation. Each share of stock symbolizes a fractional ownership position in a firm; for example, one share of common stock in a corporation that has 10,000 shares outstanding would denote a 1/10,000 ownership interest in the firm. Bonds In contrast to stocks, bonds are liabilities—they’re IOUs of the issuer. Governments and corporations issue bonds that pay a stated return, called interest. An individual who invests in a bond receives a stipulated interest income, typically paid every 6 months, plus the return of the principal (face) value of the bond at maturity. Preferred Securities Issued as stock and, as such, represent an equity position in a corporation. But unlike common stock, preferreds have a stated (fixed) dividend rate that is paid before the dividends to holders of common stock are paid. Mutual Funds An organization that invests in and professionally manages a diversified portfolio of securities is called a mutual fund. A mutual fund sells shares to investors, who then become part owners of the fund’s securities portfolio. Most mutual funds issue and repurchase shares at a price that reflects the underlying value of the portfolio at the time the transaction is made. Mutual funds have become popular with individual investors because they offer not only a wide variety of investment opportunities but also a full array of services that many investors find particularly appealing Real Estate Investments in real estate can take many forms, ranging from raw land speculation to limited-partnership shares in commercial property, even real estate mutual funds. The returns on real estate come from rents, capital gains, and certain tax benefits. Finding Investment Information How to become an INFORMED INVESTOR? Some people know more about investing than others. As a result, they may use certain investment vehicles or tactics that aren’t even in another investor’s vocabulary. Never start an investment program, or buy an investment vehicle, unless you’re thoroughly familiar with what you’re getting into! 4 types of investment information that you should follow on a regular basis: Economic developments and current events: To help you evaluate the underlying investment environment Alternative investment vehicles: To keep you abreast of market developments Current interest rates and price quotations: To monitor your investments and stay alert for developing investment opportunities Personal investment strategies: To help you hone your skills and stay alert for new techniques as they develop The Rewards of Diversification Diversification is a risk management strategy that mixes a wide variety of investments within a portfolio. A diversified portfolio contains a mix of distinct asset types and investment vehicles in an attempt at limiting exposure to any single asset or risk. It aims to maximize returns by investing in different areas that would each react differently to the same event. Benefits of Diversification Reduces the impact of market volatility A diversified portfolio minimizes the overall risk associated with the portfolio. Since investment is made across different asset classes and sectors, the overall impact of market volatility comes down. Reduces the time spent in monitoring the portfolio A diversified portfolio is more stable because not all investments will perform badly at the same time. With diversification, you will have to spend lesser time on the same and the portfolio will not require a lot of maintenance. Helps seek advantage of different investment instruments Diversification of the portfolio will balance the risk and return associated with different funds. Even if one fund does not perform well, the loss may be compensated by the profits made from other funds. Helps achieve long-term investment plans It is important for the investor to invest indifferent high-performing sectors. If the market volatility has a positive impact on stocks, the investor will be able to generate higher returns on them. If it has a positive impact on debt, the investor will be able to make the most out of mutual funds. Helps avail of benefit of compounding of interest It is important to keep in mind that if you are investing in two different funds, the fund holding for both the schemes should be different; otherwise, diversification does not make any sense. Helps keep the capital safe Diversification allows investors to achieve their investment plans while maintaining the investment risk at a minimum. It is also a method of playing safe in the volatile market. Lets you shuffle amongst investments It allows investors to shuffle their investments and take advantage of the market movement. It lets investors spread their investment across different asset classes and increase annual returns. Offers peace of mind The biggest advantage of diversification is peace of mind. When the total investment is divided amongst a number of asset classes, an investor will not be stressed about the performance of the portfolio. Basic Concepts of Investing Investing in Stocks and Bonds Mutual Funds Other Investment Vehicles Investing for the Future Investing is the use of long-term savings to earn a financial return. It is a proven and powerful way to strengthen your financial position over time. Investing is an essential part of providing for future needs. It provides a source of income in addition to a paycheck, allowing you to make money on money. Why Should You Invest? Investing Is a Way to Beat Inflation Inflation is a rise in the general level of prices. Inflation reduces your purchasing power over time. As prices rise, it takes more money to buy the same goods and services. Investors seek investments that will grow faster than the inflation rate. Investing Increases Wealth Financial success grows from the assets that you build up over time. Investing helps you accumulate wealth faster than if you simply saved your excess cash in a savings account. Investing Is Fun and Challenging Investors make choices and hope to pick winners. Once you gain experience, you can have fun choosing investments, buying and selling when the time is right, and using your knowledge to plan for your financial security. Stages of Investing Stage1: Put-and-Take Account Take money out as needed to pay your bills. This money is your emergency fund, or your “put-and-take” account. Experts recommend that you set aside three to six months’ net pay in this fund. Stage 2: Initial Investing Investing really begins when you have “excess” savings beyond what you need for daily expenses and emergencies. Your initial investing, which is your first amount set aside for investment purposes only, should be conservative with low risk. Stage 3: Systematic Investing Systematic investing involves making investments on a regular and planned basis. Stages of Investing Stage 4: Strategic Investing Once you are able to make investments on a regular basis, you can begin to build a portfolio, or collection of investments. Strategic investing is the careful management of investment alternatives to maximize growth of your portfolio over the next five to ten years. Stage 5: Speculative Investing Speculative investing happens when you make bold and high-risk investment choices. In this stage, you can make—or lose—a great deal of money in a short period of time. Typically, odds are small that you will make a profit in a speculative investment; however, when it does pay off, the profit is enormous.  What Is Your Investment Philosophy? Investors have to take risks that are appropriate to reach their financial goals. The task is to find the right balance and m ake choices accordingly. You must weigh the risks of an investment with the likelihood of not reaching your goal. Your risk tolerance is your ability to weather changes in the values of your investments. To be successful in investing, your tolerance for risk must be factored into your investment philosophy. Conservative you accept very little risk and are generally rewarded with relatively low rates of return for seeking the twin goals of a moderate amount of current income and preservation of capital. Moderate Seek capital gains through slow and steady growth in the value of their investments along with some current income. They invite only a fair amount of risk of capital loss. Aggressive If you choose to strive for a very high return by accepting a high level of risk. Aggressive investors primarily seek capital gains. Many such investors take a short-term approach, remaining confident that they can profit substantially during major upswings in market prices. Should You Take an Active or Passive Investing Approach? An investor who wishes to manage her own account by carefully Active Investor studying the economy, market trends, and investment alternatives; regularly monitoring these factors; and buying and selling three to four times a year, with or without the advice of a professional. Does not actively engage in trading securities or monitoring his Passive Investor or her investments; seeks to match the market return via mutual funds or other managed investments in the longer term. Stocks and Bonds First, bonds are loans (debt) that must be repaid at maturity. Stocks are shares of ownership (equity) in the corporation, not loans. Second, corporations must make the semiannual interest payments on their bonds. Corporations are not required to pay dividends on stocks. Bonds It’s a great way of raising an enormous amount of capital without being tied to a singular lender. And this is why bonds are heavily-leveraged by the government and big corporations. Characteristics: Coupon Rate coupon rate/coupon/coupon yield/ stated interest rate the interest rate printed on the certificate when the bond is issued. Secured or Unsecured Secured bond pledges specific assets as collateral in the indenture or has the principal and interest guaranteed by another corporation or a government agency. Unsecured bond (or debenture) does not name collateral as security for the debt and is backed only by the good faith Callable An issuer might desire to exercise a call option when interest rates drop substantially.  Security Bank Types of Bonds 1. Maturity-based bonds Bonds categorized based on the length of time it will mature. Treasury Bills (T-bills) Bonds that mature in less than 1 year (short term) The most common tenors (length of maturity) for T-bills are 91 days, 181 days, and 364 days. Sold at a discount from their face value but the investor will get the full amount upon maturity (works like a zero-coupon bond) PNB Treasury Bonds (T-bonds) Bonds that have tenors of more than 1 year. The most common maturity lengths for T-bonds are 2-year, 5-year, 7- year, 10-year, 20-year, and 30-year bonds. Pays investor coupon interest (fixed income) at fixed BDO intervals for the duration of the bond Types of Bonds 2. Issuer-based bonds These are bonds that are classified according to who issued it Government Bonds Bonds that are issued by various government agencies Low(er) default risk Municipal Bonds long-term debts issued by local governments (cities, states, and various districts and political subdivisions) and their agencies. Their proceeds are used to finance public improvement projects, such as roads, bridges, and parks, or to pay ongoing expenses. Corporate Bonds Bonds issued by public and private companies Potentially higher returns vs gov’t-issued banks Highly liquid Multiple options Benefits of Investing in Bonds Provides better returns on your money compared to banks Serves as another investment tool for diversifying your investments Lets you preserve your capital and earn interest from it at the same time Generally viewed as safer than stocks as its less volatile in nature (especially short and medium-length bonds) Bonds are tradeable (liquid) Bondholders receive some form of protection for their investment, when a company goes bankrupt, the bondholders typically receive a portion (if not the face value) of their investment There are different types of bonds that you can choose from  Investing in Stocks When you buy a share of stock, you are buying an ownership interest in a company. A public corporation is a company whose stock is traded openly on stock markets. People who own shares of stock are called stockholders, or shareholders, of the corporation. Dividends are money paid to stockholders from the corporation’s earnings (profits). Example, if you owned 10,000 shares and a company declared a P1 dividend (per share), you would receive P10,000. Capital Gains- an increase in the value of the stock over time. Example, if you bought stock for P5 per share and the corporation thrived, its stock price might go up to P10 per share. Common Stock The most basic form of ownership of a corporation. Stocks represent potential income because the investor own a piece of the future profits of the company. Preferred Stock Type of fixed-income ownership security in a corporation that pays fixed dividends. Owners of a preferred stock receive a fixed dividend per share that corporations are required to distribute before any dividends are paid out to common stockholders. They receive no extra income from the stock other than their fixed dividend, even when the firm is highly profitable. Sometimes a corporation decides not to pay dividends to preferred stockholders because it lacks profits or simply because it wants to retain and reinvest all of its earnings. When the board of directors votes to skip (pass) making a cash dividend to preferred stockholders, holders of cumulative preferred stock must be paid that dividend before any future dividends are distributed to the common stockholders. Convertible preferred stock A unique security occasionally sold by companies, can be exchanged at the option of the stockholder for a specified number of shares of common stock. Investment tips: How to INVEST in the Philippine Stock Exchange https://www.youtube.com/watch?v=UYUMsxpU3NQ Why Invest in Mutual Funds? Diversification Diversification is a primary motive for investing in mutual funds. This ability to diversify allows investors to sharply reduce their exposure to risk by indirectly investing in several types of securities and companies rather than just one or two. Professional Management While management is paid a fee for its services, the contributions of a full-time expert manager should be well worth the fee. Liquidity Mutual funds allow you to convert your shares into cash at any time. However, there is some risk of loss if the fund’s price is low when you choose to sell. Convenience Mutual funds make it easy to invest, and most don’t require much capital to get started. Opening a mutual fund account is about as easy as opening a checking account. Just fill in a few blank spaces, send in the minimum amount of money, and you’re in business! How do you earn in Mutual Funds? Net asset value per share (NAVPS) an expression for net asset value that represents the value per share of a mutual fund. After 3 years Types of Mutual Funds? Money Market Funds invest in short-term debt I just want to leave my cash instruments like time deposits. for a short period of time and earn from it, too. Bond Funds invest in long-term debt I want my money to earn but my instruments of governments or corporations. investment should be kept relatively stable. Balanced Funds typically contains a component of I want my money to earn more stocks and bonds. Typically, balanced funds stick to and I can afford to lose some of a fixed asset allocation of stocks and bonds, such as my investment for higher return. 70% stocks and 30% bonds. I want to maximize the potential of Equity Funds invest primarily in shares of stock. my money for higher return over the long term. THE RISKS AND REWARDS OF INVESTING Most rational investors are motivated to buy or sell a security based on its expected (or anticipated) return: buy if the return looks good, sell if it doesn’t. The Risks of Investing Business Risk The possibility that the firm will fail to maintain sales and profits or even to stay in business The degree of uncertainty surrounding the firm’s cash flows and subsequent ability to meet operating expenses on time Financial Risk Concerns the amount of debt used to finance the firm as well as the possibility that the firm will not have sufficient cash flows to meet these obligations on time. Market Risk Results from the behavior of investors in the securities markets that can lead to swings in security prices Purchasing Power Risk In periods of rising prices (inflation), the purchasing power of Peso declines. Liquidity Risk The risk of not being able to liquidate (to sell) an investment conveniently and at a reasonable price Event Risk Occurs when something substantial happens to a company and that event, in itself, has a sudden impact on the company’s financial condition.  Insuring Your Life Insurance Policy Is a contract between you (the insured) and an insurance company (the insurer) under which the insurance company agrees to reimburse you for any losses you suffer according to specified terms. You pay a relatively small certain amount (the insurance premium) in exchange for a promise from the insurance company that they’ll reimburse you if you suffer a loss covered by the insurance policy. R.A. 10607 As defined under Republic Act no. 10607, AN ACT STRENGTHENING THE INSURANCE INDUSTRY, FURTHER AMENDING PRESIDENTIAL DECREE NO. 612, OTHERWISE KNOWN AS “THE INSURANCE CODE”, SEC. 181. Every contract or undertaking for the payment of annuities including contracts for the payment of lump sums under a retirement program where a life insurance company manages or acts as a trustee for such retirement program shall be considered a life insurance contract for purposes of this Code Basic Terms Used in a Life Insurance Policy Insurance Policy The written contract of insurance. Policy Holder The policyholder is the one who proposes the purchase of the life insurance policy and pays the premium. The policyholder is the owner of the policy and s/he may or may not be the life assured Insured The party to be indemnified in case of a loss. It is interchangeably used with Life Assured. Sum assured Sometimes referred to as the coverage. It is the amount that the insurer agrees to pay on death of the insured person or occurrence of any other insured event. Beneficiary The person who receives the benefits of an insurance policy upon its maturity Policy tenure The ‘policy tenure’ is the duration for which the policy provides life insurance coverage. Premium The consideration given by the insured in exchange for the promise of the insurer to pay a stipulated sum on the event of a loss covered under the insurance contract. Riders An additional paid-up feature to widen up the scope of the base life insurance policy. Riders are bought at the time of purchase or on policy anniversary Death Benefit What life insurance company pays to the nominee in case the life assured dies during the policy tenure. Economic Uses of Life Insurance Life insurance makes the family financially secure after the untimely death of the breadwinner Life insurance is also a savings instrument Life insurance helps in meeting responsibilities of people even after death like higher education of children, their marriages, etc. Life insurance also provides old age benefits, which can be had in the form of annuities or a lump sum after retirement. Partners of a partnership firm can get the lives of the partners insured in order to repay the share of the dead partner to the heirs. A firm can get the life of its key man insured Group insurance policies can also be taken as a welfare measure on the lives of the employees as a whole, improving and boosting the morale of the employees resulting in improved productivity. Life Insurance Riders Riders are additional benefits that can be bought and added to a basic life insurance policy. They allow you to customize a policy and can provide several kinds of protection if you meet their conditions. Accidental Death Rider An accidental death rider pays out an additional amount of death benefit if the insured dies as the result of an accident Under this rider, you pay an extra amount to get yourself covered in case you are Critical illness being diagnosed with any of the critical ailments mentioned in the policy document. Accelerated Total and Permanent A cash benefit deducted from the base plan and paid in advance in Disability case of sickness or injury.  Insuring Your Health Health insurance is a contingent claim contract on the insured incurring additional expenses or losing income because of incapacity or loss of good health. The risk of poor health includes both the payment of catastrophic medical bills and the loss of earned income. Unless human beings have adequate health insurance, or private savings or financial assets, or other sources of income to meet these expenditures, they will otherwise feel insecure. Health insurance rightly provides timely and affordable medical help. But unfortunately, not all those who need are able to take this insurance cover. The reasons could be many, including high premiums, applicability of too many conditions and a host of exclusions. Health insurance can be seen as a weapon of social and economic empowerment of the poor. Types of Health Insurances Disability income insurance One of the oldest coverages offered by health insurers. Disability income insurance provides compensation to the insured when he is unable to perform his regular duties due to sickness or due to injuries arising out of an accident. It provides security against loss of income. Medical expense insurance Coverage is extended only when the insured is hospitalized for the treatment of the insured for injuries or sickness. Insurers directly pay the actual medical expenses to the concerned hospital where the insured took treatment. Major medical insurance Covers major medical expenses incurred by the insured person policy The insurer pays a part of medical expenses and the remaining has to be borne by the insured Protecting Your Property Property Insurance Insurance coverage that protects real and personal property from catastrophic losses caused by a variety of perils, such as fire, theft, vandalism, and windstorms. Liability Insurance Insurance that protects against the financial consequences that may arise from the insured’s responsibility for property loss or injuries to others. Most property insurance contracts define the property covered and name the perils—the causes of loss—for which the insured will be compensated in case of a claim against their policy. PROPERTY INSURANCE As a homeowner, you need an insurance that provides property coverage for potential losses to both the structure of the house and its contents. Included are damages resulting from: Fire and Lightning Earthquake Fire & Earthquake Shock Typhoon & Flood Riots, Strikes and Malicious Damage Bursting or Overflowing of Water Tanks, Pipes & Fittings Sprinkler Leakage Volcanic Eruption Extended Coverage (Smoke Damage, Explosion, Vehicular Impact & Falling Aircraft)  It is a contract whereby one (1) party promises for a consideration to indemnify the other for direct loss or damage of the insured vehicle and to pay any claim for death of or bodily injury to and property damage of any Third Party caused by or arising from the ownership or operation of the vehicle. Car insurance is first of all required by law Your car insurance is for your financial protection when you have damages to your car or cause damage to another vehicle In summary, the motor car insurance shall cover the following: Bodily injury or death of a third party. Property damage to third parties Loss of or Damage to the insured vehicle Comprehensive Car Insurance “compre” It’s not mandatory, but it is highly recommended to buy one, especially if you use your vehicle every day. a comprehensive insurance protects you, your car, as well as your passengers from an extended list of road-related risks and hazards Reasons for a Comprehensive Car Insurance CTPL insurance is not enough because someone a good driver comprehensive insurance provides financial protection to you and your car by covering car repairs and insuring you against damage, liabilities caused by collision, car theft, floods, and landslides, among many road mishaps. Unlike CTPL insurance, there are no fixed rates when it comes to comprehensive car insurance in the Philippines. Every comprehensive policy coverage differs by price as they depend on the current state of your vehicle. Factors that may affect policy rate are: Model Usage Fair Market Value Make Accessories Depreciation Year Safety Features  Planning for Retirement Retirement planning is the process of determining retirement income goals, and the actions and decisions necessary to achieve those goals. Retirement planning includes identifying sources of income, sizing up expenses, implementing a savings program, and managing assets and risk. Future cash flows are estimated to gauge whether the retirement income goal will be achieved. Retirement planning is ideally a life-long process. You can start at any time, but it works best if you factor it into your financial planning from the beginning. The Three Biggest Pitfalls to Sound Retirement Planning Because when it comes to retirement planning, people tend to make three big mistakes: They start too late. They put away too little. They invest too conservatively.  5 of the best retirement fund methods in the Philippines Pension Plans Provide you with monthly allowances or a whole lump sum amounting to your total contributions. One of the most accessible pension plans in the Philippines is facilitated by the Social Security System (SSS). PERA Personal Equity Retirement Account PERA is a type of retirement investment plan that can only be availed through banks, insurance companies, or any other administrator accredited by the Bangko Sentral ng Pilipinas (BSP), the Insurance Commission, and the Securities and Exchange Commission. PERA is a voluntary retirement contribution plan that gives you the freedom to save and invest up to ₱100,000 annually. Also, the returns are completely tax-free. Insurance Plans Another way to invest for your retirement is through insurance plans, wherein contributions lead to compensations. Aside from the financial protection it can provide your family after upon your death, insurance plans can serve as your income source upon retirement. Financial Funds Banks, insurance companies, and other institutions offer a variety of funds already invested in a diverse set of industries. Bonds, stocks, and other investments can be quite complicated. These institutions manage your money for you and enable you to participate in these kinds of investments, without giving you any stress. Real Estate The value of your house or condominium unit appreciates as the years go by, especially if you have chosen a good location. In addition, owning property that can eventually be rented out can give you a source of income once you have retired. 5 of the best retirement fund methods in the Philippines by Sheena Moringa https://www.fwd.com.ph/blog/money-and-insurance/5-best-retirement-fund-methods-in-ph/  Preserving Your Estate Estate planning is the preparation of tasks that serve to manage an individual's asset base in the event of their incapacitation or death. The planning includes the bequest of assets to heirs and the settlement of estate taxes. Most estate plans are set up with the help of an attorney experienced in estate law. The process of developing a plan to administer and distribute your assets after death in a manner consistent with your wishes and the needs of your survivors, while minimizing taxes. This process helps people accumulate enough capital to meet college education costs and other special needs, provide financial security for family members after the death of the head of household, take care of themselves and their family during a long-term disability, and provide for a comfortable retirement. It also includes plans to manage your affairs if you become disabled and a statement of your personal wishes for medical care should you become unable to make them clear yourself. Will A written and legally enforceable document expressing how a person’s property should be distributed on his or her death. Intestacy The situation that exists when a person dies without a valid will. “draw the will the decedent failed to make”  5 Reasons Why Estate Planning is Important Your estate will never go to unintended beneficiaries Naming your beneficiaries ensures that they will be the only ones who will enjoy what you leave behind. You ensure your family’s way of life Estate planning, through investments and insurance, provides a financial buffer so your family can continue living as intended. You minimize taxes for beneficiaries By law, your beneficiaries must pay a considerable amount in taxes before they can receive their inheritance. Through estate planning, this cost can be minimized significantly. You eliminate family disputes Naming beneficiaries and specifying their inheritance can minimize disagreements between family and relatives. You enjoy peace of mind Having a plan in place means you can sleep at night knowing the future of your loved ones is safe and secure. https://www.manulife.com.ph/en/individual/what-s-new/5-reasons-why-estate-planning-is-important.html