Is it true that term insurance is more worth than life insurance? What are the different pros and cons for term and whole life insurance? - Seedly
 

Term Life Insurance

Whole Life Insurance

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Asked by Darren Lim Jia Kai

Asked on 10 Jun 2019

Is it true that term insurance is more worth than life insurance? What are the different pros and cons for term and whole life insurance?

Will you buy term or life insurance? If you are single? And what if you are married? Will you change your term to life insurance?

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Hi Tan, I suggest you speak to a financial advisor for face to face advice.

The first thing you have to decide is how long do you want protection for? Till your kids are independent? Till you have no more liabilities? Till you retire? Till you die?

Next is to ask yourself, if you do die, who will be financially affected? If no one would be, don't need to be insured. If yes, how much and for how long? Can they rebound after your death?

Do also consider, how about when you fall sick and don't die? You'll definitely be financially affected, even if you're single. Again, how much and for how long would you be affected for?

The rule of thumb is, if you have financial dependents: Get Death Coverage till they become independent for about 10 X of your annual income.

And even if you don't have financial dependents: Get Critial Illness Protection for about 5 X of your annual income. I recommend this for life.

So it'll end up with you having some Whole Life Cover and some Term cover. It's not one or the other.

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Siow Nan
Siow Nan, Electrical And Computer Engineering at Nus
Level 6. Master
Answered on 10 Jun 2019

Agree with hariz, good to have some of each to cover for different needs and requirements. You can choose to increase your coverage once you are married or have children or aging parents during your regular insurance reviews.

I would first go for a hospitalization plan, followed by term/life insurance.

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Takingstock @
Takingstock @
Level 6. Master
Answered on 11 Jun 2019

Both answers above are good. Because insurance is a long term commitment, my own revised guidelines for myself 1) first build your emergency mth of at least 0.5 month salary. 2) buy hospitalization / medical plan 3) check you already have Dependent protection scheme (Dps) 4) check your parents /children are covered for hospital / medical plan 5) for new whole life / term policies, I think talk to a proper advisor. Best not to be a close friend in case things sour. Ignore ILP / Unit linked plans for time being until you are ready for advanced level.

Personally I am of strong opinion total insurance premiums for every policy you are paying cannot exceed 12% (i believe it should be less than 8%, but it depends where you are at in your career stage) of your annual take home pay but this is an advanced discussion.

6) have mortgage insurance for property.

The rest I think are advanced topics.

If you really want to buy an ILP or unit linked scheme for retirement or wealth building, please consider topping up your minimum sum in cpf or SRS first. The 4% guaranteed return in cpf sa + tax relief on your contributions will very likely beat any returns the ILP can offer.

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There are no absolutes until your scope of cover is defined. From there, can there be some form of advice given.

How long to cover, your age next birthday, sum assured.

Term pros

  • Cost efficient, able to convert to whole life, able to employ "buy term invest the rest". Term cons
  • lapsed once premium not paid, not inflation adjusted, no cash value

Whole life pros

  • guaranteed renewable and issuability once incepted, policy loan (lapse is less possible), cash value to hedge, inflation adjusted Whole life cons
  • more expensive because of savings component, IRR is only 3-4% at most

Know what you need. To find the strategy to cover what is required.

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Eric Chia
Eric Chia, Senior Financial Consultant at Prudential
Level 6. Master
Answered on 12 Jun 2019

Hi Darren, just adding on to others' comments above here.

Term is cheaper if you're planning to stay covered for the next 10 to 20 years (less than 70yo in general). Whole life is cheaper if you prefer coverage until 99yo with limited payment term.

You can consider a combination of whole life and term plans, where the whole life plan covers your final expenses and/or daily expenses for you and your family in the event of death and critical illnesses.

Then term plan of about 10 to 20 years can come in if you have newborn, since extra coverage is needed during the years when your children are growing up.

No right or wrong in planning like this. How much to buy and what to buy depends on what your priorities are.

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