Whole Life Insurance
Asked on 12 Nov 2018
I am a 24 year old fresh grad. And an only child. Using this as a way to force myself to save.
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.
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.
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.
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.
If your agent is still around in 20 years time, then get it. Else, do not.
If in doubt, call your agent if s(he) will be around in 20 years time.
Life is good.
Not an agent. But here is the thing. One doesn't really know where life takes you - unless you take charge and makes sure life is walked the way you want it to.
Contrary to some recommendations, you may want to continue on your path. I will give you a take on this.
WL is expensive in general. However, it is cheap when taken up young due to the long time horizon. It is useful especially if you have family and children later on, and also as an inheritance gift to them or to your nieces/nephews/charity (if willed or nominated to them).. However, one doesn't know at this age if he or she may get married or have children at all.
Balance it. Just get sufficient WL (lock in price) that you think even if end up not having a family.. the surrender value is something useful for emergency/retirement and coffin money. You can then top up with term life (adjusted when lemons rain on you) and do other investments.
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.
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.
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.
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.
14 Nov 2018