Most employed individuals have healthcare and (sometimes) insurance coverage from their company/employer, and so it is up to the self-employed worker to find and pay for their own providers. The following information is a general guide to make sure you’ve got your healthcare, insurance, and savings needs covered.
SSS (Social Security)
Here are the benefits you can get as a registered self-employed member:
- Retirement/ Pension (minimum of 120 months of contributions)
- Sickness benefit
- Maternity benefit
- Disability benefit
- Death & Funeral
- Employee’s Compensation (EC) Program: work-related sickness, injury, or death
- Salary Loan
You can find more details about the benefits here and what application forms to fill out from the SSS website. If you have not registered for an SSS account yet, I suggest reading this article first. They also have an online payment system available.
At the beginning 2020, PhilHealth released a new computation rate for contributions. Rates are now based on basic income salary, and this includes self-employed individuals. It will be a gradual increase from 2020-2025, as part of the plan for a Universal Healthcare in the country. A difference from the previous contribution system is that retroactive payments are now allowed, with additional interest fees.
At this point, it’s best to be informed on how much you should be paying based on your income salary. And according to my PhilHealth informant, the updated rates can only be paid to PhilHealth offices and centers because most Bayad centers do not have the systems in place to receive these payments as of now.
HMO (Health Maintenance Organizations)
In addition to Philhealth, you can choose to avail of a comprehensive annual plan with an HMO. A less popular but much cheaper option is to get annual prepaid health cards for specific medical needs (check-up, emergency, confinement). Websites like Mariahealth.ph can help you find an HMO plan or prepaid health cards that work for you.
Here’s are a few examples of popular HMOs: Maxicare, MediCard, ValuCare, Insular Health Care, Intellicare, Pacific Cross
And Pre-paid health card providers: InLife (Insular Life), Maxicare (EReady), MediCard (RX), PhilCare
This article provides details about several HMOs and what they offer.
Retirement Savings (voluntary)
SSS PESO Fund (Interest growth average: 2.5% per annum)
A voluntary savings program with interest growth and tax-free earnings. This can also function as one’s retirement savings and the contributions tailored to your preferred amount and frequency. It just means you can contribute anytime as long as you are an active SSS member, and your savings contributions do not fall under the minimum of 1,000 per transaction or 100,000 per annum.
PAGIBIG MP2 (Interest growth average: 7% per annum (in the last 5 years):
As explained by PAGIBIG: “The MP2 Savings is a special savings facility with a 5-year maturity, designed for Pag-IBIG Fund members who wish to save more and earn even higher dividends, in addition to their Pag-IBIG Regular Savings. The program is also open to pensioners and retirees who were former PAG-IBIG Fund members.”
This fund functions like a time deposit but the interest growth is not fixed and varies per year, based on the growth of PAGIBIG MP2’s investment funds. You also need to be an existing PAGIBIG FUND member to apply for this.
I decided to sign up for it and can say that this fund is:
GREAT for those who have savings they are not planning to withdraw and use anytime soon.
GOOD for retirement savings
NOT THE BEST for those looking for a fixed interest growth
NOT GOOD for those planning to use funds within or in less than a year.
For more information, please visit the PAGIBIG FUND website.
Tax-exempt UITFs (PERA)
Many local banks offer PERA or Personal Equity and Retirement Accounts. Ask your local bank what kind of retirement accounts they offer since these will differ. The main features of this type of account include:
- Tax-exempt earnings
- Choice of investment product depending on your risk appetite (bonds, equity, money market)
- Tax-exempt withdrawals can be made only at 55 years of age, with a minimum of 5 years of contribution. Early withdrawals are subject to penalty fees.
- Minimum of 100,000 per annum contribution and 200,000 for OFWs.
- Distributions upon death, for beneficiaries, are free from estate tax.
- Management fees of 0.5- 1.5% (depending on the investment product)
Term insurance: Perhaps the most cost-efficient insurance available and usually covers life and/or critical illness with options for additional riders. This is renewed and paid for yearly and gets more expensive with age (usually every five years). Most insurance agents won’t offer this immediately unless you ask them specifically because it’s a lot cheaper so they get less commission.
Term insurance is mainly designed for maximum INCOME PROTECTION & REPLACEMENT in case of critical illness/accidents, inability to work, and death.
VUL (Variable Universal Life): This type of insurance is aggressively marketed because of its cash value and interest growth features. Be careful though with expectations since this is basically 50% an insurance tool and 50% investment tool. Unfortunately, many agents and companies only emphasize the investment portion.
From what I understand of this insurance product, the accumulated cash value and interest growth are meant to pre-pay and fund your future insurance. So you are buying 70-80 years’ worth of insurance within your payment term (usually 5, 10, or 15 years). It just gives you the benefit of increasing your fund value over time, but the insurance portion will get deducted every year until death from this fund value, or until you withdraw all your funds (which terminates your insurance). On top of that, financial markets can affect your payments, depending on the type of investment you chose.
But this product does have its benefits like risk management in that you are guaranteed 70-80 years of insurance without worrying if you’ll be eligible after having health problems. Also, the fund value growth can serve as an emergency fund during hard times.
Life insurance via Banks: Some banks offer accounts with built-in life insurance when you maintain a certain amount. This can also serve as your emergency fund which is very important for self-employed workers since we don’t have the benefit of severance pay when you suddenly find yourself without work. Having said that, it might be wiser to have a separate emergency fund (with a high savings interest rate) if this account will serve as your ONLY life insurance.
Here is a list of the top 10 Insurance providers in the Philippines based on the Insurance Commission (IC) (Source: wiseguyph.com):
Other Types of Insurance
There are other kinds of insurance that you might want to look into depending on your priorities and needs. Below are a few examples:
Home & Property
Death & Funeral (pre-need plan)
Loyola Memorial Plan
Featured image by Tim Foster from Unsplash.com