When getting a whole life plan, how important is the option to convert cash value into annual payouts to you?

Asking because:

-I assume that we should retain the cash value of a WLP. Because the main point of getitng one is to ensure we have coverage for death, CI & ECI throughout our life.

-There is a group of people who would say, "might as well take some money out from a policy you've been paying for", but my thinking goes back to the previous point - that a WLP should fundamentally provide my sufficient CI & ECI coverage. These cash payouts would eat into the sum assured as well.

Just putting this out, to know if I'm missing any considerations.

Esp amongst those who consider this product feature as a key requirement when buying WLP.

Pls share if you have any! :)

Discussion (6)

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Elijah Lee

04 Jan 2024

Senior Financial Services Manager at Phillip Securities (Jurong East)

Hi choco.dreams,

Thought I'm late to this but I'll put out my perspective anyway.

Yes, a whole life plan is indeed meant for whole of life coverage (especially for CI or ECI). We will need money when we're sick and that can occur at any point in our lives. For other scenarios such as leaving money behind if you have dependents, a term would likely be the better option.

Considering the effects of reversionary (and terminal) bonuses, the payout of a whole life plan will only increase over time. This helps to combat inflation. So while it may seem like the values in the policy are quite large in 40/50 years time, the reality is that it is probably not as big as it seems.

The next thing to consider is how much payouts would deplete by if you take out cash. In my experience (based on looking at quotations all these years), quite a fair bit. So honestly, I don't see this feature as something that I would place very highly as a key requirement for a whole life plan. To some people however, this feature may still be important to them. Are they wrong? No. To each his own.

Sure, it could be useful if you really needed funds, but short of an unexpected disaster, one's retirement should not have to depend on drawing down cash value from plans meant for retirement. Planning ahead for retirement should allow one to enjoy both whole of life CI coverage and yet have sufficient income flows to have a comfortable retirement. Proper planning and strategizing will be key here.

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Imayoot

02 Jan 2024

Wealth Manager at Phillip Securities Pte Ltd

What Whole Life plan were you recommended?

There are Term plans that you can be covered till 99, lesser premium than WL plan for sure and have CI & ECI coverage.

Now the WL plan in the market give you up to 5x coverage from your basic Sum Assured till a certain age (depending on your insurer)... Subsiquently it will either drop back to the basic sum Assured or down to 2.5X (depending on insurer)

If you are looking a using WL Cash value, I think I know what those group are taking about- ask the agent you will be getting the policy from and see if they can come up with a strategy for you.

No right or wrong, just how you and your representative plan for you

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