Asked by Anonymous

An agent recommended me Whole Life insurance multiplier with a premium term of 20 years. Can I treat this as a way to save my monthly income for the surrender value at the end of the policy's life?

I am a 24 year old fresh grad. And an only child. Using this as a way to force myself to save.

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  • Loh Tat Tian
    Loh Tat Tian
    Level 6. Master
    Answered on 12 Nov 2018

    A Whole Life Plan, as the name suggest, is a "whole life" plan. The most if you wish to save, is to count it as a retirement plan at age 70 (but please do your own calculation on the internal rate of return).

    A whole life plan is a hedge for Critical illness protection more than savings (which, unless you are looking at retirement protection and inflation hedged).

    To get a decent return, you should consider Singapore Savings Bond, or even CPF (up to $60,000), to enjoy the 3.5-5% interest it gives.

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  • Nicholes Wong
    Nicholes Wong, Diploma in Business Management at Nanyang Polytechnic
    Level 6. Master
    Answered on 12 Nov 2018

    If this is your only way you use to force yourself to save, you are not saving anything. Dont get whole life for the surrender value. Surrender value is when you decide to stop the whole life policy for whatever reason. Using surrender value of a whole life to force yourself to save doesnt make sense for me. Save before you spend. If you think saving money is very important for you and your family, start taking control of your money instead of getting forced to.

    End of the policy life = End of your life.

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  • Hariz Arthur Maloy
    Hariz Arthur Maloy, Independent Financial Advisor at Promiseland Independent
    Top Contributor

    Top Contributor (Apr)

    Level 7. Grand Master
    Answered on 12 Nov 2018

    You're dead at the end of the policy life.

    A whole life plan is meant to only touch when you're dead. Not much use for the money there.

    Get it for lifelong protection for the people depending on your income.

    Treat the cash value in the policy only as an emergency fund you can tap in, if you're unemployed for a long period of time, etc.

    If you're planning to cancel the policy for its surrender value at retirement age, I'd suggest you take the Term + Invest the Difference route.

    However, there are other policies that can help you save.

    Endowments.

    Usually they are bought with a very specific end goal in mind. A down-payment on a house, children education, retirement nest egg.

    But if you're just looking for a safe way to accumulate money with a 3-4% return, you can look into getting a perpetual endowment plan.

    Some of these plans allow for unlimited withdrawals after a specific period of time, and you can let your money compound even after the premium term.

    It becomes an income generating asset that's quite flexible.

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    • Loh Tat Tian
      Even as an emergency fund, its incurring about 4.5% to 6% interest p.a not wise also haha. Better to have it as liquid asset.
      12 Nov 2018
    • Jonathan Chia Guangrong
      There are perpetual endowments that all you to do multiple withdrawals without penalty.. But I won't touch them with a fifty foot pole since i can build a better house on my own
      12 Nov 2018
  • Jason Sin
    Jason Sin
    Level 5. Genius
    Answered on 12 Nov 2018

    No, it is better to separate between savings and insurance. The returns for individual savings and insurance would be higher than when you combine the two.

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  • Jonathan Chia Guangrong
    Jonathan Chia Guangrong, Fund Manager at JCG Fund
    Level 6. Master
    Answered on 12 Nov 2018

    Separate investments / savings from insurance. If you are looking towards 'forced' savings with potentially good returns, use a vehicle like what is being offered by Maybank Kim Eng with their monthly investment plan. Can start with as little as $100 a month and buy into blue chip stocks listed on sgx, some reits and both of the STI etfs. Please do your own due diligence on the individual stock counters before you embark on this.

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  • Lim Chun Long Jimmy
    Lim Chun Long Jimmy, Biz Partner at Flagship Games
    Level 5. Genius
    Answered on 12 Nov 2018

    Assuming you wanna save for retirement without investing, you may be better off buying term plan(s) with similar or higher coverage, and put the rest in high-grade government bonds such as Singapore Savings Bonds.

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  • Boonhow Eng
    Boonhow Eng
    Level 3. Wonderkid
    Answered on 12 Nov 2018

    personally, i dont use whole life plan as savings. insurance is not saving, use it as insurance. you can save your money in other forms.

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    • Carol Tham
      Agree with Boonhow & Hariz.. Actually life insurance is meant for family. To help deal with situations where you might be permanently disabled and need the funds to pay medical or help with living expenses. Alternatively, if you pass on, then for burial and other purposes for the loved ones still alive. The surrender value gets more as you pay the policy longer, but it is not a way to save. You can access the loan in times of emergency... but then again, that is EMERGENCY. If you really want to save, open a separate account to place your money and when there is sufficient for you to invest in something, do that, or if you want to play safe, put it into fixed deposit. Or get one of those work as you save accounts where you are forced to put money aside monthly.
      14 Nov 2018