I recently bought a Whole life Insurance Policy 2 years ago called PruLife Multiplier Flex. I'm having thoughts now of switching to Term Life Insurance instead. Is it silly of me to surrender it at 0? - Seedly
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Anonymous

Asked on 17 Jun 2020

I recently bought a Whole life Insurance Policy 2 years ago called PruLife Multiplier Flex. I'm having thoughts now of switching to Term Life Insurance instead. Is it silly of me to surrender it at 0?

Regarding whole life insurance policy, not sure if should surrender now at $0 value and buy term life insurance policy, and invest the rest.

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Hi anon,

If you have a PruLife policy, it'll come with CI cover, and probably early CI cover as well. To give you an equivalent cover with a term policy, you'll need to have it run for many years, and pay for many years as well.

Ultimate you need to look at the numbers between your options and see which one makes more sense. Right now, a whole life with critical illness/early critical illness rider has a good chance of being cheaper in total cost compared to a similar coverage term policy, with the added benefit that you retain CI cover for the rest of your life. Yes, premiums might be higher by a couple of hundreds on a yearly basis, but you probably pay only 20-25 years as opposed to every single year on a term. In this case, Whole Life has a strong case going for it.

Your savings will be, at most, a few hundreds a year on a term policy with CI/ECI build in. With such numbers, you would likely be better off improving your human capital and increasing your salary. Furthermore, note that cost savings are really only for the first 20-25 years. When you finish paying for the whole life, you can start to invest that money, whereas your term plan will continue to be payable as long as the policy duration.

In the end, most people will very likely end up spending those savings on a whole plethora of things other than investments. Unless you are very disciplined, those savings from buying term might end up on bubble tea or something.

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Hey there!

You might want to reconsider your objectives for getting a whole life plan at the start. There are always pros and cons to every plan you get and you have to make sure you have to evaluate what fits your present needs to make a decision.

The cash value shouldnt be your main objective in getting a whole life insurance since it's main objective is to provide life time coverage. Do consult your agent or someone trusted and reach out if you require some clarification.

Financial planning is an integral part of life. You can reach me here to find out more.​​​

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Hi Anon,

I think it would be better to keep the policy, as you mentioned that if you were to surrender now, you would actually incur losses.

Also you could look at it as a policy that will provide you with CI coverage for the whole of your life and that is definitely a good to have cause CI is one of those things that can occur to us within our lifetime.

In regards to buy term invest the rest, I think you could still invest now and ideally your investments will allow you to continually invest further with its profits. So it's not necessarily always about buy term invest the rest, cause investments should be something to look at whenever we are able to.​​​

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BTIR simply does not work for the vast majority of people. This comes from real world experience, not theory.

If you are comparing it with additional Early Stage Illness, the term plan will not be as cost efficient as you think. I suggest you do a 1-to-1 comparison of the term plan till age 65/70, together with the term lasting till age 100 before making that conclusion that term is better.

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Woo

Woo

Level 4. Prodigy

Updated on 18 Jun 2020

  1. dun just listen to those huff and fluff "invest the rest" without understanding your own situation.

  2. if you dun hav dependents u dun even need term. there is no cash value at the end of term policy if u dun die.

  3. WL usually has cash component at the end, u can see it as a long term savings account at higher yield. if u can trust prudential.

  4. if u chose to surrender, u can see it as 2 yrs of sunken costs which covered u for past 2 yrs. no, not sily at all.

  5. what is the difference betw the 2 premiums? are they of same terms and similar coverage? are u sure u can get better returns frm investing?

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