facebookI'm 28 with dependants (wife and child). Bought whole life three years ago which is expensive and I have existing loans of $25k. Should I surrender it and get term insurance to invest/save? - Seedly

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Anonymous

22 Apr 2020

Insurance

I'm 28 with dependants (wife and child). Bought whole life three years ago which is expensive and I have existing loans of $25k. Should I surrender it and get term insurance to invest/save?

Discussion (4)

What are your thoughts?

Soon Xiaohui

Soon Xiaohui

28 Jun 2018

Level 6·Analyst at Common Place

Hello there, actually there is different kind of loans; if you are more specific on it, it would be more easier to help you on it.

Anyway since you already servicing your whole life for 3 year, and if your is limited premium plan (meaning you are required to pay for a limited time), why don't you reduce the coverage of it. In this way, you do not incurred losses Yet you still have some protection left.

Then you may use the excess to get a term plan to cover your dependent's needs and more cash flow on hand.

If you need assistance on the coverage reduction & to look through your cashflow, do drop me an email @ [email protected]

Alternatively, you may reply to this post too.

Always remember in any planning, affordability is the most important. Wish you all the best. :)

Hi, If your existing loans are personal loans (interest rates greater than or equal to 3% per annum), I will strongly advise you to terminate your whole life and use the premieums to pay off your loans. This is because of the idea of opportunity cost

This is because paying down the loans is as good as obtaining retunrs on a investment of 3% in the short run. Based on data, there has been no whole life insurance which gives policy holders a return of 3% if they terminate it early. The only instances where whole life has been able to give policyholders a returns of greater than 3% is when the policyholders die and redemption occurs. In your case, it is going to take at least 50 years, so cut your losses on whole life, use the money which you would have spent on premieums to pay down the loans (assuming the interest rates of your exisitng 25k loan is greater than or equal to 3% per annum).

Gabriel Tham

Gabriel Tham

28 Jun 2018

Level 14·Tag Team Member at Kenichi Tag Team

If you surrender early you probably incur a loss on the policy.

However, one should go for a pol...

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