Index UL vs Term

Hi anon,

​

My question to you would be: What is your objective in the first place?

​

Are you trying to leave behind a legacy for others?

​

If so, then the next question is to evaluate your options and understand them well. You were recommended an IUL but there are other options in the market as you have discovered. My brief thoughts as follows:

1. IUL. I believe you have asked about the cost of insurance in other threads. Yes, while the crediting on the index account is typically floored at 0% even in a market downturn, you still need to take into account the cost of insurance which will eat into account values. The problem with COI is that it is exponentially increasing, so even with good market returns, COI can outpace the crediting rate in later years. Then your account values will be at risk.
2. Term till 99. That's another option, however do note that you don't have to pay for 40+ years. There are term to 99 plans with limited premium payment periods (e.g. to age 65). This would take care of the lapsation issue (if you miss a premium in your retirement due to cashflow or forgetfulness) and yet ensure that the payout will occur when you are no longer around.
3. Single premium WL. Such plans are also an option, and basically function with a) a baseline coverage for life b) boosted coverage till a certain age (e.g. age 85) and c) after the boosted coverage ends, it will fall back to the baseline + credited bonuses. Like a term plan, the COI is already factored in so there is no explicit COI to pay.

You'll have to examine these three before deciding which is best for your.

​

However if you want to guarantee the payout, then my view is that only option 2 or 3 would make sense, depending on which suits your budget.

​

All the best!

(Disclaimer: Everything below is my own opinion as a private citizen. I am not a licensed FA so do not treat my words below as official financial advise)

​

First, we need to know what is the coverage of the UL you are looking at (e.g. crediting rate, any investment risk that you bear, any fees, etc).

​

For the term plan, i assume its a plain vanilla one (i.e. one single death payout)

​

For Index UL, I'll use one example here from Prudential: https://www.prudential.com.sg/-/media/project/p...

​

Some questions one can ask before deciding whether "Index UL is more worth":

• "Index" usually means it refers to some benchmark. So in case the benchmark does not do well (e.g. S&P500 during Mar-20), what happens to your account value? e.g. if the account value falls below a certain level, will you be required to top up, else the policy lapses?

(I noticed Pru's product above has a no-lapse period only for the 1st 5 years. So what happens if the market is down anytime from the 6th year onwards?)

• What are you looking for? e.g. flexibility to grow money then withdraw while maintanining some death coverage? If yes, then the Index UL might be better than term
• Are you comfortable with the high cash outlay? (e,g, while term might eventually cost you more than 50k over a 40y period but you are spreading the cost over a time period. and also consider that present value of say 1k in 40 years is a lot lesser if you discount it into today's terms)

TLDR:

• Both Index UL and term have their own pros and cons. Know what each offers in terms of cash inflow and outflow, and see which suits you best (as the saying goes, one man's meat is another man's poison)
• If still not sure, seek opinions from licensed FAs until you're satisfied.

​

I don't think it's worth it

Both products are different, so end of day see which you prefer, the product is designed cos some consumers like it that way, while some do not.