Should I opt for a life insurance plan with $20k better coverage but premiums to be paid in 15 years or a plan whereby premiums can be paid off in 25 years?

Hi anon,

The more important question to ask is: Do you need $100K coverage or $120K coverage?

More important than how long you will be paying premiums for (over 15 or 25 years) is the question of how much coverage is enough for you. If you need $120K coverage based on your needs, then you should be getting that amount of coverage. Then work out if you can afford paying the premiums over 15 years, or if it will ease your cashflow by paying over 20/25 years instead.

The general rule is not to spend more than 10% of your income on insurance. The surrender value should not be a key factor in determining which one to buy, as you never buy life insurance with the intention to surrender.

Firstly, we need to consider your affordablity and the opportunity cost to that end. For the latter, it is likely that you pay a lesser premium to the insurance company every year. Consequently, this gives us additional liqudity for other purposes.

Next, we need to have a complete understanding on the insurance coverage and whether the premium is guaranteed. This is because the premium for some riders are non-guaranteed. In this situation, it is certainly better to have a shorter premium paying period.

Assuming all equal and affordability is not an issue, it seems like the 15 year payment plan is better with its additional coverage and cash value. However, we need to do a detailed side-by-side comparison before I can give you the most accurate advice.

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