For a 5 Yr old child. Should i get a term or whole life. I hear that whole life is cheaper for young children. And what is front end load for insurance.Thank you!

Hi anon,

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For a young child, the only time I would consider Whole Life would be when it comes to Whole of Life, Limited Payment with CI/Early CI cover. Such plans can be cost efficient, especially when it comes to early CI. You may pay more on a per year basis compared to a term with CI but you're pretty much done in 10-20 years, depending on your budget/preference, so your total premiums are lower.

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The reason why you would want to get CI cover for a child are plentiful.

1. Lock in insurability. I have seen many cases whereby a child was diagnosed with certain medical condition that makes them permanently uninsurable, or makes it very difficult to get coverage later on. I'm working on a case right now and this 25 year old lady was diagnosed when she was 6 years old with a particular endocrine disorder. She's fine after treatment but 3 out of 6 insurer declined CI cover, which she desperately needs as she is working. I've seen many other cases as well, some of which were totally uninsurable.
2. Lock in premiums. Goes without saying, it's cheaper when they are young.
3. In the event something happens when your child is young, the payout will enable one or both parents to stop work for a while to take care of the child, without causing financial stress to the family.

Front end load is a term more commonly applied to unit trusts, it is a cost you pay when buying. Typically also referred to as sales charge, upfront fee, etc. For pure insurance products, the pricing is already determined by the insurer and it cannot change.

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So if you're looking to pre-emptively get some CI cover for your child, then WL would be a good way of doing it. Just note that the comparison between various WLs is not that straightforward as they all have varying scope of coverage as well as features, so you will want to do a comparison to make sure you get one that is value for money.

Hi, do not over-complicate insurance for a young child. Life insurance is not absolutely necessary if you are on a budget. However, if you are looking at insurance, a whole life for a kid makes a lot more sense. Reason is because term policies are "pay as you use" so it means that eventually, your kid will need to continue paying if he wants to be covered.

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Imagine if your kid is 1 years old. If you buy a term policy and wants to cover him till 65, you will need to pay for 20+ years and when he is self sufficient, he will take over the policy and pay till 65. Insurance policies generally gets better eventually so having an old term plan might not be useful by then and he would be better off surrendering if he wants to free up cash and then maybe get a policy at that time. If he surrender, there is also no cash value.

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On the other hand, if you buy a whole life, you pay till he is 21 (assume 20 years payment period) and this policy covers him all the way till the end of his life. The value you get is a lot better. Additionally, he does not need to take over the policy and continue paying. He can then decide how he wants to structure his own insurance portfolio with the knowledge that he is somewhat covered.

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Just my two cents.

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As for front end load, I believe it is a term only used for ILPs which are not whole life or term life policies so it should not be relevant to you.