Whole Life Insurance

How would the returns of a whole life plan be compared to putting said premiums into CPF SA instead, over a same time period?

Some people buy Whole Life insurance which pays out upon death. Assuming no insurance benefits eg cancer waiver etc and just looking at Death at 75, how would the returns of a whole life plan be compared to putting said premiums into CPF SA instead, over a same time period?


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Definitely insurance will pay out more in the event of death than a pure investment vehicle doing 4% return. But let's show the proof.

I'll be using Manulife LifeReady with a base sum assured of $500k for a Male Age 30 this year with no multiplier.

You'll be paying 8300/yr for 25 years. Total premiums paid $207,500.

By age 75, your death benefit will be a projected $1,163,075 of which $663,075 is non guaranteed giving you a XIRR of 5.30%.

Now, if you invested that $8300 over 25 years and let it roll until 75 with CPF SA and get a pure 4% return, you'll get a guaranteed $757,386 by age 75 about $400k less.

But even if you don't die, and decide to surrender your policy at age 75, you'll have a projected Surrender Value of $794,484 of which $452,984 is non-guaranteed which is also more than CPF SA.

Here are a few things to consider:

1) The additional payout above $500k on your WL policy is non-guaranteed. If you're conservative, you can expect half of the projected bonuses which will give you about $830k upon death at 75.

2) CPF SA will be emptied to pay for CPF Life premiums and not all of that money will continue to receive a 4% return after age 55.

3) CPF SA monies are untouchable before age 55. WL policy gives you access to your monies, albeit at a price.

4) If you die way before 75, you'll get a minimum of $500k while you may only receive just a little bit more on your CPF savings.

5) If you're investing and expecting a payout only when you die, insurance would be a better tool. But anytime you want money while you live, then it may not be the best. Other tools can give you more liquidity with similar risks (and no I'm not talking about CPF SA either).

6) It's not a super fair apple to apple comparison, and it shouldn't be an absolute one over another. They have different uses. Some of your money should be in a government pension plan, some in insurance, some in equities, some in bonds, and some in real estate. Having a good mix is having a balanced portfolio.



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Loh Tat Tian
Loh Tat Tian

08 May 2019

I thought the main point of this comparison is basically for buy term and invest the rest. Also, we did not state the tax relief from earlier years, and also i believe it might be way better to have the same equity / portfolio at CPF SA 50% and 50% if 35% equities and 65% others
Hariz Arthur Maloy
Hariz Arthur Maloy

08 May 2019

Tat Tian, I wanted to sideways this to a BTIR comparison but it wasn't what OP was asking. He also wants to earn from the death benefit of the WL, so do we a buy a term to 75 or to 100?