Asked by Anonymous
Asked on 27 Jun 2018
Hello there, actually there is different kind of loans; if you are more specific on it, it would be more easier to help you on it.
Anyway since you already servicing your whole life for 3 year, and if your is limited premium plan (meaning you are required to pay for a limited time), why don't you reduce the coverage of it. In this way, you do not incurred losses Yet you still have some protection left.
Then you may use the excess to get a term plan to cover your dependent's needs and more cash flow on hand.
If you need assistance on the coverage reduction & to look through your cashflow, do drop me an email @ [email protected]
Alternatively, you may reply to this post too.
Always remember in any planning, affordability is the most important. Wish you all the best. :)
Hi, If your existing loans are personal loans (interest rates greater than or equal to 3% per annum), I will strongly advise you to terminate your whole life and use the premieums to pay off your loans. This is because of the idea of opportunity cost
This is because paying down the loans is as good as obtaining retunrs on a investment of 3% in the short run. Based on data, there has been no whole life insurance which gives policy holders a return of 3% if they terminate it early. The only instances where whole life has been able to give policyholders a returns of greater than 3% is when the policyholders die and redemption occurs. In your case, it is going to take at least 50 years, so cut your losses on whole life, use the money which you would have spent on premieums to pay down the loans (assuming the interest rates of your exisitng 25k loan is greater than or equal to 3% per annum).
If you surrender early you probably incur a loss on the policy.
However, one should go for a policy that is affordable. If you are finding it hard to keep up with the premiums, then you might want to consider other alternatives or lower the coverage.
I'll list them some questions for you to check away so that you can make a decision
Yeah I think largely agree with what Gabriel has shared regarding the idea on if you find it hard to keep up with the premiums etc you should consider incuring the loss. I guess importantly if you have a whole life, probably your agent sold it to you. Would highly recommend sitting down with him/her to go through the reasons you bought this whole life and whether those reasons have changed.
I think at that point you probably did not have existing loans (eg the 25k) and now you exist at a different life stage. Critically, you will also need to find out if within the 3 years you had any medical condition etc which may have changed your underwriting status. If medically you remain the same, you can def consider the option of term life (for it's more affordable stance).
Secondly, if there was any riders tied to that whole life policy (eg any H&S plans or Critical Illness plans) which most likely would have been add-ons that was sold to you during the earlier period.