Asked by Anonymous

I'm 25 and I've just bought a term plan (Aviva - 500k death and TPD with multipay ECI -$1,179.30). I'm cash tight cus of my low pay. Did I make the right choice to choose this over whole life?

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  • Clarence Chua
    Clarence Chua, Financial Planning Specialist at Prudential Assurance Singapore
    Top Contributor

    Top Contributor (Apr)

    Level 6. Master
    Answered on 27 Apr 2019

    10% of whatever you earn should go into your protection needs.

    If $1,1793.30 is not 10% then you alright with your commitment. You should not give up your insurance cause of low pay. You will insurance more if your pay is not as high, cause you will be more vulnerable to the bills and expenses.

    Term plan is good if you need high coverage and have a tight budget. Both whole life and term both serve to protect your income, choose the one you need more, as your income grow, you can slowly expand and build your portfolio

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  • Loh Tat Tian
    Loh Tat Tian, Ex-Financial Advisor, Founder at Singapore Insurance Value Finding
    Level 6. Master
    Answered 4w ago

    My question to you is simple.

    What is your current needs? Do you need a savings plan on top of your coverage? Do you need This coverage till age 99? Are you OK with the amount growing at about 3-4% of the money you put in?

    From your answer, you are already cash strap. So term is the answer only. If you can afford whole life, you can afford to buy term and invest the rest. Are you going to invest the rest?

    If you can't afford whole life, then you are in deep trouble because you definitely have low income, and any advice to buy whole life is really bad imho.

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  • Charmaine Ng
    Charmaine Ng, The Value Maximizer at @ Every Ma La Xiang Guo Stall
    Level 5. Genius
    Answered 4w ago

    If you're cash strapped and already struggling; review if you're paying too much for your insurance. Whole life is not recommended and to me, more costly so term insurance is the way to go for me if I'm in your situation.

    Review your financial status and identify your reasons for getting the insurance. Are you the sole breadwinner? Perhaps after reviewing you'd notice you wouldn't need such a high coverage at this point of life after all.

    Please upvote if I make sense 😏

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  • Li Yu
    Li Yu, Financial Services Consultant at Manulife Financial Advisors
    Level 3. Wonderkid
    Answered on 27 Apr 2019

    If you are already cash tight with a term plan, don't need to think about whole life becos it's gonna be much more expensive for the same amount of coverage.

    I'm not sure till what age you are covered by this term plan, but the sum assured looks quite decent for a 25-year-old.

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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 26 Apr 2019

    If you can't afford 100 a month for your insurance, you can't afford to die or fall sick. I'm sorry but that's the truth.

    If you really want, you can reduce your sum assured and pay less premiums, and increase it again when you get married or buy a house.

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    • Brinjalpea
      Thank you for your reply! Another advisor is asking me to change my Aviva term plan to GE whole life cus it has value. I just bought my Aviva in March and just met this new advisor last week. Should I listen to her? Since she keeps convincing that it has value
      27 Apr 2019
    • Hariz Arthur Maloy
      Nope, that's bad advice. You're sacrificing lots of short term coverage for less long term coverage. Coverage comes first. If you want you can get additional whole life to cover for insurance needs in old age, especially for critical illness insurance, but you shouldn't be replacing your existing term for a WL.
      27 Apr 2019
  • Brandan Chen
    Brandan Chen, Financial Planner at Manulife Singapore
    Level 5. Genius
    Answered on 26 Apr 2019

    For the same coverage, you would probably be more cash tight should you have taken a whole life plan.

    Term provides you with high coverage and lower premiums.

    If you are feeling cash tight, it could be due to a couple of issues: 1) Premiums are too high for your affordability 2) You may be spending too much on other expenses

    If your overall insurance cost is about 5 - 7% of your income, (I assume your financial advisor also recommended you to take up a shield plan), it should be due to Reason 2 stated above.

    Feel free to PM me if you would like to seek a second opinion. I am contactable via www.facebook.com/brandanchen

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  • Alan Kor
    Alan Kor
    Level 4. Prodigy
    Answered on 26 Apr 2019

    Term plan - low premiums, high coverage till a certain date

    whole life plan - high premiums, low coverage for life

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  • Gabriel Tham
    Gabriel Tham, Kenichi Tag Team Member at Tag Team
    Top Contributor

    Top Contributor (Apr)

    Level 8. Wizard
    Answered on 26 Apr 2019

    If you find yourself struggling to pay, then its probably too costly for you.

    Sit down with your agent or find another financial planner to work out the details for you.

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