Buying Child Whole Life with ECI and CI

Hi anon,

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You don't buy a whole life plan to surrender it. You buy a whole life plan to provide whole of life cover without having to pay whole of life premiums.

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Regardless of how premiums have been in the past, that era is over. You can only look forward. Some of the best plans I've seen are also off market, and if you're in the market to look for coverage, you can only work with what's available now.

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Frankly, given the general insurability of young children as well as lower premiums due to age, if the budget allows, getting whole of life CI cover for your baby is probably something that can definitely be considered. I'd personally take a high multiplier to maximize coverage, up to a point where premiums are something comfortable for me. Surrender value is something I don't look at. Claiming will always have a higher payout compared to surrendering. Why surrender when it's not a cash flow drain (assuming you have paid up the plan?)

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It's good that you have no significant medical history, although that would be more likely to come into play when you are considering your own coverage.

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Before considering getting coverage for your baby boy, make sure you have sufficient coverage for yourself first.

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Speak with a trusted advisor if you need more tailored advice.

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(As a side note, mortality has gone up due to COVID-19. That explains why you are getting lesser coverage for the same premiums compared to the past. However, I've also noticed that AIA premiums have gone up quite significantly compared to pre-covid days. Other insurers, not so much)

In order to answer your question, I feel that it is important for us to take a step back to understand what is your primary purpose - are you getting a whole life insurance policy for your child’s protection, or for wealth accumulation?

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If it is the latter, then in most cases, there are much better financial instruments available on the market. To that end, you shouldn’t really consider a whole life insurance policy as the first choice. With this in mind, there is no much meaning to choosing a whole life insurance policy with a higher surrender value (unless that plan is a well deserved all-rounder with higher coverage as well).

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Next, let’s look at the perspective of using a whole life insurance policy for your child’s protection. Obviously in this case, the primary objective would be to spend the least amount of money to get the maximum amount of coverage that you need. Accordingly, how are you going to achieve this to this end? For example, it could be to increase the premium payable, adjust the multiplier factor, change the multiplier drop-off age, etc.

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Given that there are so many factors that you can adjust in order to achieve the optimal outcome, you may wish to conduct a deeper analysis and comparison to that end, e.g. against the other options available on the market, as well as the factors to fulfil your expectations as closely as possible.

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At the same time, you may also wish to embark on comprehensive financial planning to determine what your child really needs, as well as on how to afford the cost of premium in the long term. After all, early termination would lead to losses in most cases. Hence, I feel that it is important to explore deeper on your needs and have a detailed understanding on how this plan is able to fulfil your child’s needs.

Finally, I will highly recommend you to learn more about how a participating whole life insurance policy works and how the surrender value is being generated. From there, you can gain better understanding onto why there aren’t the best tools for wealth accumulation.

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Read More: What is a Participating Whole Life Insurance Singapore