I'm making decision for ECI plans. I am trying to weigh between Aviva MMPCI $780/mth till 75 and a whole life paying 25 years around $1.7-1.8k/mth from several insurers. Should I BTIR or just buy a whole life plan? - Seedly
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Anonymous

Asked on 17 Jul 2020

I'm making decision for ECI plans. I am trying to weigh between Aviva MMPCI $780/mth till 75 and a whole life paying 25 years around $1.7-1.8k/mth from several insurers. Should I BTIR or just buy a whole life plan?

Been reading many articles/answers here but still a dilemma. And I need to really spot a investment that will make BTIR works, versus the cash value for whole life. Is multipay more ex than single pay?

  • 32YO, Non-smoker, no dependant, currently 50K CI covered

  • only liability to foresee is buying resale HDB in 3 years time

  • with no dependant (no kids), TPD/Death benefit not so relevant right?

  • Looking at 150k Coverage: Aviva MMCI $50K (3x Multiplier to make 150k CI coverage), whole life 150k

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Hi anon,

Let's address your points in order:

  • As a 32YO non smoker with no dependents, then you don't need death coverage. But yes, you do need to bump up CI.

  • You can get HPS to cover the mortgage

  • Correct on death. But TPD cover can be considered as it would mean that you are not able to work due to TPD cover and you will lose all future income but still need money to survive

  • I think your premiums are in per year instead of per month? $780/mth for a multipay CI is expensive.

Now, my view is as such. You can get multipay CI, and Aviva's plan is decent, plus all future premiums are waived if a claim on layer 2 is triggered. However, this also means that if you are blessed with good health, your cover ends after 75, and you would be paying premiums till then. My personal view is that I would rather have CI coverage for life, especially when you are in your retirement years and an illness can wipe out your savings and retirement fund, leaving you with little to live on if you survive the treatment and recover.

Thus as a first layer of defense, I would normally look at a whole life limited pay CI to ensure that I have some amount of CI cover at least in my retirement years. Multipay is a great add on especially if you fear recurrent cancer or the like, but it is also payable for many years (your total premiums would be around $32-$33K if payable till 75) where as whole life would be around $45K in total (around $40K total if you pay over 20 years). In this context, is paying $7K-$12K more for whole of life coverage worth it? This is something you have to examine and decide for yourself.

For BTIR to work, you really have to be disciplined to invest the difference, which, is less than $100/mth if you opted for Multipay. I would think that climing your career ladder and getting that extra $100/mth increment would be easier in a way. In addition, when you have made the investment returns, you need to consider the situation in old age whereby markets are down and yet you need to liquidate your investments to fund your treatment. Contrast this with a policy which guarantees your payout in old age, even if markets are down, and that can only continue to grow in value the longer you hold it.

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Fx Yong
Fx Yong
Level 2. Rookie
Answered on 21 Jul 2020

Hi anon, do you mean $780/year for your aviva multipay coverage of $50k based sum assured with 300% for late stage critical illness? Because $780/month for that coverage seems abit too costly?

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BTIR rarely works. Limited whole life BTIR IRR begets you 5% in the long term.

Do your numbers and decide if you want automation or DIY.

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Hi there,

It is a very common question when deciding what kind of coverage you would want to proceed forward with. Often based on my experience thus far, most investors would opt for BTIR as they are currently invested, and have the prerequisite knowledge on how to maximize their investments.

Some investors still opt for whole life policies (WLP) as they want a more permanent solution stretching beyond their working years. Multipay is generally more expensive, as they have included the probability for multiple claims in the policy, therefore higher risk. Also, as there is no limited pay option, the overall cash outlay will be subtantially more as well.

There is no straightforward answer with regards to doing term or WLP, it depends on your strategy in managing your financial portfolio here on out. For your queries, i will address them systematically,

  1. Based on the profile you have shared, it is good that you are currently exploring coverage for your Early CI and CI coverage, as that looks to be the highest priority as of now.

  2. If you have been working for about 10 years, you should be able to make downpayment on a prospective resale. The only cash outlay, could be from renovation costs.

  3. Depending on your occupation, TPD coverage is important to provide income replacement in the chance scenario that you are unable to work in the future due to disability. Death benefit, would be in the context if your parents would still be relying on you in the future. So it is still relevant to an extent, but not at the highest priority.

  4. For your proposed selection, i would try as much to align the coverage amount to an amount that would be relevant to you. (E.g. In the event of Critical Illness, and you are unable to work, how long would this money last you?) In terms of what to get, you will need to decide whether a permanent solution (WLP) vs a term solution riding up to 65/75, is sufficient for yourself, as things might change in the future.

That being said, if your quotations are,

Around 780/mth, 9360/year for your MMPCI, and 1.8k/month for a WLP, you might want to consider other insurers, as that pricing is on the extreme end. 540k for a WLP or 402K for term over the course of the policy is abit excessive to my knowledge.

If you need some clarity with regards to the affordability, and therefore your dilemma regarding whether term or WLP would be better for you, do reach me at here to schedule a consultation. As a consumer, I always advocate for my clients to have the best information before making a huge financial commitment.

I hope i was able to address your queries, have a great week ahead!​​​

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Multipay is more ex than single pay.

As it is relatively new in the market, we don't see too many multiple claims based on the requirements and waiting periods between claims. I'm personally inclined to stay away from multipay as from what I've seen, most people usually only claim once. I would prefer to have received all my CI payouts and manage it personally than to bet against not claiming for a full year before the "reset" function kicks in.

You don't have to follow all the experts writing these articles and flexing how well they can perform with their BTIR strategy if you aren't comfortable with it. At the end of the day, its your life and you should plan around something that you are able to commit to.

How feasible would it be to pay for a term insurance until 75?

Would you be comfortable paying for the policy even after you have retired for CI on top of your other policies (Eg. Hospitalisation, PA, Disability income)

Can you forsee that you will be able to keep your job and sustain the payment term until then? Most people who are retrenched in their 50s already find it tough to find employment.

Having said, if you are an investment guru or have the ability to consistently generate returns year on year on your investments, from an opportunity cost basis I don't see why not go for BTIR!

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Question Poster

19 Jul 2020

Price wise (yearly premium) I conclude, Highest price to low, WL > Term Multipay > Term ECI/CI. Correct? Yes as it is quite new I wanted to hear if multiple claims are indeed what most people worry, as this plan boast a max 600% payout across the 4 tiers. Also partly you are right, I can't predict future but just having an eye on possible employment issue beyond 50 as what you mention. Hence premium payment for Term plans might be a strain. With the yearly payment I mentioned, what % of investment returns should I be looking to optimally make BTIR work harder against the whole life yearly premium quotes I was given? I'm looking at DCA S&P500 or tech ETFs, that will be rates that could make BTIR works. Thoughts?
Nigel Tan
Nigel Tan

20 Jul 2020

Yes for the pricing. Hmm, given the projected cash values in most PIPS, I would say 2-3% would be the rate to beat. However, if you are looking towards investing in higher return products, try to go for at least 5% if possible. I personally feel there is an additional opportunity cost when investing outside. A lot of people tend to sell off in a down market which defeats the purpose of dollar cost averaging. Generally, emotions tend to blindside us when it comes to investments.
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Generally, a multi-pay critical illness insurance policy will be more expensive than a single-pay critical illness insurance policy, ceteris paribus. One of the reasons is because of the additional risk and payout involved after the initial claim.

Next, you need to determine whether you are disciplined, and possess the right knowledge, skills, and experience in order to use the right financial instrument to grow your money. Otherwise, you may not be better off with "buy term, invest the rest".

On the other hand, a participating whole life insurance policy will provide you a basic guarantee in part of its cash value, alongside with non-guaranteed cash value in terms of bonuses.

More Details:

What is a Participating Whole Life Insurance Singapore

Reversionary Bonus and Terminal Bonus Singapore

Without a doubt, this option will be more expensive than a simple term insurance policy. However, you get cash value for the premium that you pay, alongside with other policy features (if any).

Moving on, you need to have the uncanny ability to plan beyond 3 years. For instance, will your priorities change, or whether you will have dependents in the future? In such situations, you will be forced to pay a higher premium for the rest of your life.

In any case, you will still be alive and likely to expect to live the full life expectancy in the unfortunate event of Total & Permanent Disability. Therefore, such coverage is certainly important and relevant.

On the whole, I will suggest for you to spend quality time to plan forward for your future. This will allow you to make the right financial decision today. Of course, speak with an experienced consultant who may be able to guide you along the way.

Finally, for early critical illness coverage, take note that not all insurers offer the same definitions for payout. Generally, all my clients prefer to be insured under plans with a broader definition for claim. This become even more imperative for multi-claim plans. Thus, this may be a worthy point for your consideration, in addition to price and other benefits.

Read Part 1.2 for an example on Recurrent Heart Attack: Critical Illness Definition Changes Singapore: Clarity comes with a Cost

I share quality content on estate planning and financial planning here.​​​

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