The Right Insurance for First Jobber

When we graduate and step to working age, it’s time to be fully responsible for our lives. We’ll easily achieve financial success if we set up a financial plan once we start working. One of the financial plans that can secure your life is a life insurance plan.

Many “First Jobbers” or people who just “start working” may think that insurance is not necessary because they’re still young, healthy, and at low risk, or may feel that they don’t have much enough money to pay a monthly premium, and they still have to pay for other matters. Anyway, the COVID-19 pandemic may have changed those attitudes. Many people have more concern for their health and realize that sickness or unexpected situations may happen with no age limit; however, if those challenges occur, they would affect their life and financial status. Therefore, planning for suitable insurance is considered significant.

Things to be Concerned about Insurance for First Jobber

1. The objective of insurance: As there’re plenty of insurance types, we need to know why we apply for it such as to protect life, to collect savings, etc. When we know our objective, we can choose an insurance that mostly meets our demand.

2. An ability to pay insurance premium: Money is essential for the first jobber as they don’t earn much when they start working so they need good financial management. That’s why choosing affordable premiums is important and the ratio of good premiums shouldn’t exceed 10% of total income per year.

Which Type of Insurance suits First Jobber

1. Whole Life Insurance is insurance that protects the assured’s entire life (the protection lasts at the age of 90 – 99 depending on insurance type). The insurance company will offer benefits to the beneficiary under 2 cases.

a. If the assured passes away, the insurance company will pay the sum assured to the beneficiary.

b. If the assured stays alive until the contract ends, the assured will receive a sum assured.

The prominent point for Whole Life Insurance is the sum assured is high and its premium is low, and tax can be deductible if income reaches the tax threshold. This insurance suits those who need a high sum assured to protect expenses and debt burden in case of unexpected situations. Therefore, it fits First Jobber who need life protection with affordable insurance premiums.

2. Endowment Insurance is insurance that focuses on savings together with protection. If we pay a full premium by the policy term (10 years, 15 years, or 20 years), the insurance company will pay benefit to us either by one-time sum of cash or cash on the way through the contract. If we pass away while the policy is effective, the beneficiary will receive a sum of money which is called “sum insured” as stated in the contract.

Compared to Whole Life Insurance with an equal premium, the sum insured of Endowment Insurance is lower because the insurance company will take a part of the premium and then later generate them to be our savior. Thus, Endowment Insurance fits First Jobbers who look for security as they’ll get savings including protection in case of death. However, the benefit is not high compared with investment in other assets like a stock, fund, or real estate. The average benefit of this insurance is about 1.5 – 2% per year and tax can be deductible.

3. Health Insurance is insurance that focuses on offering protection for existing expenses from the insured medical treatment derived from sickness or injury from an accident. At present, health risk no longer occurs in the middle age or elderly group. Emerging infectious diseases or severe diseases can be harmful to all ages.

Many people may perceive that Health Insurance premium is wasteful and it’s not worth paying so they don’t care for it. In fact, Health Insurance is to manage risk from the unexpected event and we never know whether that situation will cause damage. For example, if we pay the premium of 10,000 baht annually every year, we’ll know the total amount of payment and protection coverage. Once we get sick, we’ll feel relieved that the insurance company is responsible for certain expenses (depending on protection coverage).

If we don’t own Health Insurance, we’ll have to take all risks. In the case of an unexpected event, our expense maybe 50,000 Baht, 500,000 Baht, a million Baht, or much more than we can handle, and that will certainly affect our financial status.

Considering current fringe benefits before planning to buy Health Insurance; for example, company group insurance or social security rights, and then comparing our demand such as the medical expense of the hospital we regularly visit and check if there’s any difference. We may add some more insurance coverage that we’re missing.

In summary, First Jobber should select insurance that matches each individual under a suitable budget. Most importantly, study about terms and conditions applied to each type of insurance before making a decision to gain maximum benefits.

Nipaphan Poonsathiensap CFP®, ACC
Freelance Financial Planner, Writer, and Lecturer