18 Jun 2020
Regarding whole life insurance policy, not sure if should surrender now at $0 value and buy term life insurance policy, and invest the rest.
Tan Li Xing
18 Jun 2020
Financial Consultant at Prudential Assurance Company (Singapore)
I think it would be better to keep the policy, as you mentioned that if you were to surrender now, you would actually incur losses.
Also you could look at it as a policy that will provide you with CI coverage for the whole of your life and that is definitely a good to have cause CI is one of those things that can occur to us within our lifetime.
In regards to buy term invest the rest, I think you could still invest now and ideally your investments will allow you to continually invest further with its profits. So it's not necessarily always about buy term invest the rest, cause investments should be something to look at whenever we are able to.
18 Jun 2020
Independent Financial Advisor at Phillip Securities (Jurong East)
If you have a PruLife policy, it'll come with CI cover, and probably early CI cover as well. To give you an equivalent cover with a term policy, you'll need to have it run for many years, and pay for many years as well.
Ultimate you need to look at the numbers between your options and see which one makes more sense. Right now, a whole life with critical illness/early critical illness rider has a good chance of being cheaper in total cost compared to a similar coverage term policy, with the added benefit that you retain CI cover for the rest of your life. Yes, premiums might be higher by a couple of hundreds on a yearly basis, but you probably pay only 20-25 years as opposed to every single year on a term. In this case, Whole Life has a strong case going for it.
Your savings will be, at most, a few hundreds a year on a term policy with CI/ECI build in. With such numbers, you would likely be better off improving your human capital and increasing your salary. Furthermore, note that cost savings are really only for the first 20-25 years. When you finish paying for the whole life, you can start to invest that money, whereas your term plan will continue to be payable as long as the policy duration.
In the end, most people will very likely end up spending those savings on a whole plethora of things other than investments. Unless you are very disciplined, those savings from buying term might end up on bubble tea or something.
BTIR simply does not work for the vast majority of people. This comes from real world experience, no...
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