Buy term, invest the rest. Skepticism about whole life but now..?

I’ve always been a skeptic on whole life insurance policies. Recently reviewed my policies as I do not have a CI plan in place and thought that was one of the “must” haves to stay protected.

I’ve gotten a couple of quotes across AIA, Aviva and Manulife and if I look at it from a financial standpoint, whole life is surprisingly the cheaper option from Manulife with ECI rider coverage.

Need some opinions here. Running out of characters to my question, happy to share more details if needed.

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Al

19 Oct 2020

As many have mentioned before, the whole BTIR is an argument that just doesn't hold true all the time. You are right to be skeptical. Countless articles and excels in the last decade have made it almost law.

But hey, the insurance industry isn't as dumb as we think they are. They change due to changing consumer wants. Businesses adapt and evolve to survive.

So if the numbers check out and suit your risk appetite, considering you have done your homework, I don't see how differing opinions should sway you. Differing opinions will differ from a risk appetite perspective, which might not be applicable to you.

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Pang Zhe Liang

19 Oct 2020

Lead of Research & Solutions at Havend Pte Ltd

Generally, the Life Insurance Association Singapore (LIA) mandates the use of its definitions for the conditions in its framework. In detail, this applies to the standard list of 37 conditions at the severe stage only. You may find more information here: Life Insurance Association Singapore (LIA) Critical Illness Framework 2020

Consequently, price and amount of coverage is no longer the sole factor for consideration. Instead, we must bear in mind the definition for claim. This is especially important when we look at conditions beyond the framework, e.g. early critical illness coverage.

Additionally when you look into a whole life insurance policy, there is likely a participating cash value. Be that as it may, part of this cash value depend on the insurer's participating fund. Overall, we will want to have proven track records at a low expense level. Otherwise, it is inefficient to that end.

More Details: What is a Participating Fund Singapore

In summary, there are various factors that contribute to the premium that you need to pay, as well as the actual coverage that you receive in return. While the terms for coverage may seem to be the same, you will need to scrutinise further in order to know exactly what you are paying for.

Above all, life insurance is a long-term commitment and you won't want to choose the wrong policy and put your hard-earned money into it.

I share quality content on estate planning and financial planning here.

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