21 Jul 2020
I'm making decision for ECI plans. I am trying to weigh between Aviva MMPCI $780/mth till 75 and a whole life paying 25 years around $1.7-1.8k/mth from several insurers. Should I BTIR or just buy a whole life plan?
Been reading many articles/answers here but still a dilemma. And I need to really spot a investment that will make BTIR works, versus the cash value for whole life. Is multipay more ex than single pay?
Let's address your points in order:
As a 32YO non smoker with no dependents, then you don't need death coverage. But yes, you do need to bump up CI.
You can get HPS to cover the mortgage
Correct on death. But TPD cover can be considered as it would mean that you are not able to work due to TPD cover and you will lose all future income but still need money to survive
I think your premiums are in per year instead of per month? $780/mth for a multipay CI is expensive.
Now, my view is as such. You can get multipay CI, and Aviva's plan is decent, plus all future premiums are waived if a claim on layer 2 is triggered. However, this also means that if you are blessed with good health, your cover ends after 75, and you would be paying premiums till then. My personal view is that I would rather have CI coverage for life, especially when you are in your retirement years and an illness can wipe out your savings and retirement fund, leaving you with little to live on if you survive the treatment and recover.
Thus as a first layer of defense, I would normally look at a whole life limited pay CI to ensure that I have some amount of CI cover at least in my retirement years. Multipay is a great add on especially if you fear recurrent cancer or the like, but it is also payable for many years (your total premiums would be around $32-$33K if payable till 75) where as whole life would be around $45K in total (around $40K total if you pay over 20 years). In this context, is paying $7K-$12K more for whole of life coverage worth it? This is something you have to examine and decide for yourself.
For BTIR to work, you really have to be disciplined to invest the difference, which, is less than $100/mth if you opted for Multipay. I would think that climing your career ladder and getting that extra $100/mth increment would be easier in a way. In addition, when you have made the investment returns, you need to consider the situation in old age whereby markets are down and yet you need to liquidate your investments to fund your treatment. Contrast this with a policy which guarantees your payout in old age, even if markets are down, and that can only continue to grow in value the longer you hold it.
BTIR rarely works. Limited whole life BTIR IRR begets you 5% in the long term.
Do your numbers and ...
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