Signed WholeLife insurance ($153/mth) in July but having regrets after reading online that part of my premiums goes to FA comms + feel that my sum assured of 37k is too little. I am thinking to cancel?

Hi Anon,

I think it's important to know that when you go through an insurance agent/financial advisor you are paying for their advice. They cannot be working for free, right? Just like how interior designer firms earn monies within their quotation for their services vs hiring a contractor. I suggest you do not focus so much on how your premiums goes to FA comms as all products purchased through a FA will have comms embedded in them. If you prefer not to have a FA whom you can ask for any financial advice anytime, help you with servicing and liaise within the insurance company, you can purchase from direct platforms.

Usually a whole life sum assured will have multiplier benefit - so your base sum assured could be $37k but sum assured after multiplier could be (e.g. 2x: $37k x 2 = $74,000/ 3x: $37k x 3 = $111,000 / 4x : $37k x 4 = $148,000).

Buy Term + Invest the rest is quite the attractive option if you are looking at cost-effective coverage as PAR funds within a Whole Life plan will probably give 2-4% return max. If you are confident on your investment returns, you can go ahead and cancel the Whole Life plan.

Just note that:

90 days waiting period applies (which means if you cut off your WL plan in Nov 2020. Even if you purchase a Term in Nov 2020, there will be a 90 days waiting period for your Term plan ie. if anything happens within this 90 days, you will not be covered - ready policy contract for more details). Typically we would suggest keeping the Whole Life for the next 3 months while letting the Term 90 days take effect. However, if you are okay with terminating the WL and having a 90 days waiting period, it will be at your own risk.
Longest Coverage out there for Term is till 99 years. But if you're looking to keep the cost low you may want to have a term till age 60-70.

Hi anon,

If you are looking at ECI coverage, a whole life plan is probably better than a term plan in terms of total premiums. It doesn't have to be that expensive either, considering that you are also young.

A $50K basic sum assured with x4 multiplier, full ECI whole life plan for your age would cost $180/mth for 25 years. A $200K full ECI term plan costs$125/mth f or 44 years. Both plans provide you with $200K ECI coverage till 70, but the whole life plan continues to protect you after age 70. Surprisingly in terms of total premiums, the term plan is actually more costly by ~$12000. So we can't say that a term is necessarily cheaper.

I am not sure what other protection policies you have, but 10% of your income is a decent guideline, and it is just that, a guideline. It is not a hard limit. You may have to exceed marginally (maybe 11%?) but that is better than underinsuring. In time, your salary will also increase and the % of your salary spent on insurance would drop.

If you are thinking of cancelling the current whole life, you'll get your premiums back if it is within the free look period. After the free look period, you'll just lose the premiums already paid.

Term plans do run till age 99 and a number of companies do have such plans, but if you are adding CI/ECI rider to a term plan, it may not really be cost efficient as I pointed out above.