Insurance vs Trust: Choosing one or better together?

For many Filipinos, life insurance is often the first step they take to protect their family’s financial future. While it provides valuable financial security, it is only one part of a comprehensive estate plan.  

What is often overlooked is that receiving assets is different from managing them. This is where trust may play an important role. 
 

What is a life insurance?

Life insurance is a way to financially protect oneself and one’s family. It provides a sum of money when unexpected life events such as death, disability, or serious illness occur.  

The sum payable to the insured can help cover medical expenses, replace income if incapacitated; and settle debts, education, and cover estate expenses for the insured’s beneficiaries. Simply put, life insurance provides the funds when they are needed most.
 

What is a trust?
 

A trust is a legal arrangement that can consolidate, manage, and distribute one’s assets, specifically through a Personal Management Trust. Here, a person may set guidelines as to when, how, and to whom his assets will possibly be given to. This may help ensure that wealth is preserved and transferred as intended.

Read more here: Think you’re too young for estate planning? Think again 
 

How do they work together?
 

Imagine parents who purchased life insurance to help fund their children’s education should the unexpected happen to them. The insurance provides the financial proceeds, but with minors as beneficiaries, this may create legal and practical challenges.  

By establishing a trust, the insurance proceeds may instead be invested until they are needed. Distributions may be made according to the parents’ instruction, such as, to pay for education or to be released when the children reach a certain age or milestone.

In a way, insurance provides the source of funds, while the trust determines how those funds are managed, protected, and distributed. Together, they provide greater financial security and control on how the trustor’s legacy is passed on.
 

Where to start? 
 

Life insurance and trust have distinct but complementary roles in estate planning. Together, they may help create a more thoughtful and comprehensive legacy plan.

If you wish to begin your estate planning journey, connect with your Metrobank relationship manager or visit a Metrobank branch. They can help you arrange a conversation with a Financial Advisor and a Trust Account Manager. 

MARIEL LOPEZ is an Investment Counselor at Metrobank, with experience in Trust Banking. She holds an AB Political Economy degree from the University of Asia & the Pacific (UA&P), an MBA from the Ateneo Graduate School of Business, and has completed the Registered Financial Planner (RFP) course. Outside of finance, she enjoys reading, teaches barre, and competes in Hyrox.