Which is more worth it to purchase for a 24 year old working adult? AIA power critical cover or Whole Life Insurance?

Hi anon,

Power Critical Cover was taken off market on 31st March this year. Still, alternatives are available from other insurers.

I think what you need to do is to ask yourself what matters to you. We'll examine your two options here, which are multi payout plans, and whole of life CI plans.

Whole Life plans

• One time payout (two, if you have both an ECI and CI rider and ECI strikes first)

• Has a multiplier to boost the payout amount during your working years

• Cash value will kick in during retirement to hedge the payout amount against inflation over time (it's not meant to be surrendered)

• Limited payment duration means premiums can be paid during your working years, but premiums will be higher

Multipay plans

• Multiple payouts are possible, if you meet the payout criteria. Some plans can payout up to six times in theory (but you'll have to be very very sick repeated for that to happen)

• The payout amount is typically the sum assured regardless of the stage of CI, but some plans will pay more if it is a late CI

• No cash value as they are term plans, and generally lower premiums on a yearly basis as you spread out the premiums through the entire duration of the plan. Total premiums might be higher than that of a whole life.

• Premiums are payable as long as you have not claimed, or if a waiver has not yet kicked in

What I want to point out is this: You can't compare them head to head. They function very differently, although their purpose is still the same: To provide a lump sum payout in the event of CI so as to ensure that one's finances are not destroyed by a life changing event. No one would have known when they will be diagnosed with a CI, so having that coverage is important for that peace of mind.

While I personally feel that some level of CI cover is definitely beneficial in retirement, ultimately it is your needs that shape your decision. CI cover in retirement is probably best supplied with a whole life CI plan as you would have paid it off by the time you retire and it will not be a strain on cash flow for you, unlike a term plan that may run till age 75 or longer. If you have worries about CI striking more than once, or a recurrence of CI, then a multipay plan will address those worries.

If your worry is about both, then you may consider a combination of some whole life cover, and a multipay plan with coverage till your expected retirement age. This helps you hedge the risk and probably address both concerns, and at the same time, with the multipay plan covering you only during your working years, you won't have to worry about premiums in retirement as well.

Speak with an advisor should you need more tailored advice.​​​

Hi,

AIA power critical cover is not available in the market anymore.

Also, when you are buying life insurance, the main objective should not be focused on the cash value. The purpose of a whole life plan is to provide coverage for a lifetime, the surrender value is just a second option or a choice if you really really need money and have no choice but to give up on the policy.

If you are buying a whole life plan with the intention of surrendering it at a certain time, it might be better to do wealth accumulation separately.

It would also be a lot more cost efficient to add on the CI rider to your whole life plan instead of getting a separate CI and a whole life for death/tpd.​​​