Asked by Anonymous

I have 2 Life Insurance, Sum. A: 100k, SV: 20k, Premium 60/mth & Sum. A: 60k, SV:20k, Premium 40/mth.Graduating in 2 years time, uni debt 23k. Should I surrender one life policy to pay for the university fees? Or should I pay with lump sum cash. ?

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  • Hariz Arthur Maloy
    Hariz Arthur Maloy
    Top Contributor

    Top Contributor (Apr)

    Level 7. Grand Master
    Answered on 23 May 2018

    Hi Anon, I believe these policies were purchased for you by your parents correct?

    Cancelling a life policy may not be a good idea, as you would have probably paid more premiums than the current surrender value.

    Also, must you pay off your uni debt in a lump sum? Or do you have options to pay it off monthly? Also it would be important to know the interest you're paying on it.

    Because you would still require coverage either now or in the future.

    Plus, paying off debt on time, monthly, actually looks good on your credit score.

    So if a monthly repayment scheme is available, plus the interest for it is not absurd, i would refrain from cancelling the policy to pay off my debt.

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  • Gabriel Tan Jun Wei
    Gabriel Tan Jun Wei
    Level 3. Wonderkid
    Answered on 23 May 2018

    Judging by the amount, I would assume the policies are bought for you by your parents. Now that you are a young adult, your parents are letting you in on these policies. Ask your parents what is the initial idea of buying these policies - it looks like they are meant for your education fund as in the past, there were very few products in the market for child's education.

    if you have the cash ready, I would suggest you to use that lump sum cash to pay for your university fees. With about $160,000 of coverage, in the future when you are working, you'll have lesser protection gaps to fill.

    Meanwhile, look to find more part time jobs or adhoc jobs for income. The money from your employment can be used to pay off your student loans and if you are very prudent, you might even have a sizeable savings by the time you have graduated.

    Surrndering your life insurance policies can be tempting but I think it should be your last resort. There are many alternatives to settle your student loan.

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  • Gabriel Tham
    Gabriel Tham
    Top Contributor

    Top Contributor (Apr)

    Level 8. Wizard
    Answered on 22 May 2018

    Are the 2 life policies the same type? coverage overlapping each other?

    As the premium per month is different from each other, i'm not sure if they are the same type of policies or just different companies charging differently.

    If you deem that both policies are effectively the exact same, just different fees, then maybe u can choose to focus on one policy and terminate the other.

    But ensure that you have enough cover too. As you are still young, switching policies is still pretty cheap and low cost. You can look around for cheaper alternatives or just stick to current.

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  • Joel Lok
    Joel Lok
    Level 1. Freshie
    Answered on 23 May 2018

    1) work out the IRR for these few years before maturity/ IRR during these few years

    2) if irr less than 2.5%, likely can surrender or sell the plan

    3) if irr more than 2.5%, consider using cpf to pay your fees instead if possible.

    4) consider withdrawing revisionary bonus

    5) consider policy loan

    6) consider policy overdraft

    I'll not be able to advise further until I manage to see your policy and work out the numbers rationally. If you wish to do it please kindly pm me.

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  • Vincent Chong
    Vincent Chong
    Level 1. Freshie
    Answered on 23 May 2018

    Hi Anon, how many more years to maturity on your policy? Not enough details to comment yet

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  • Jarett Jeyadas Mathew
    Jarett Jeyadas Mathew
    Level 1. Freshie
    Answered on 23 May 2018

    Firstly, I will never reccommend you to surrender the policies, here is why:

    1. They were cheap if they were purchased years ago. As you grow older, insurance becomes more expensive due to the motality rate.
    1. You are most likely losing out if you cash out, as the premiums paid will not justify the surrender value.
    1. If you were to surrender it now, you will lose coverage and should the unfortunate happen your loved ones are left with nothing.

    Things to consider :

    1. Is there a need to pay it in lump sum?

    2. Installment plans available?

    I personally feel the debt of 23K might not be really huge and even paying about ~$500 should get your debt cleared in 5 years.

    Yours Sincerely,

    Jarett J Mathew

    JarettJmathew.com

    [email protected]

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