Asked by Anonymous

My insurance agent keeps telling me term is more expensive then whole life in the short term. Paying about 2.6k a year for whole life with ci and eci. Is is true that term is more expensive?

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    • Luke Ho
      Luke Ho, Money Maverick at Money Maverick
      174 Answers, 291 Upvotes
      Answered 2w ago

      That is a very weird thing to say to someone.

      For ECI and CI, there does tend to be a cost disparity. If you have Term ECI from the time you're 25 to like 75, for example, there's a pretty good chance you'll have forked out a total sum of money thats higher than a Whole Life plan paid in 15, 20, even 25 years...

      E.g. Term was $1000/yr

      WL for 20 years was $2100

      Total premium paid by age 75 (Term): $50,000

      Total premium paid by age 75 (whole Life): $42,000

      This actually happens quite a lot for my clients. The whole life becomes very appealing then, because its not only cheaper overall but has cash values and the sum assured scales with inflation decades after you finish paying for it.

      But in the short term (1 - 5 years) there's absolutely no whole life plan of the same sum assured, even with multipliers, that can be as cheap as Term. So that's very odd to me. I'm just going to assume you meant long term.

      Obviously, there are potential issues with forking out more money upfront, especially if you are an avid, aggressive investor, so it's not all sunshine and roses. If you can beat 6% annualized and you're already quite diversified, most people like that can probably just buy a nice ECI Term and invest the rest instead.

      You have an insurance agent already, but you can always PM me for a second opinion.

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    • Lim Wei Siang
      Lim Wei Siang, Financial Consultant at Advisors Alliance Group - Aia Fa
      12 Answers, 12 Upvotes
      Answered 2w ago

      Dollar paid vs Cover received

      Term offers the highest payout on every dollar you pay.

      A proper analysis, review and discussion should be done to identify the life stage you are in and what your concerns and priorities are.

      And as answered by Dawn, as Term premium increases with age, when you start buying will also be a factor you should consider.

      I think it is unfair to any Term product out there to received such a label. Every product has its purpose.

      Having a Whole Life with CI & ECI is important no doubt, but is that the basis for the switch? Have a proper review and discuss. Take control.

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    Dawn Fiona
    Dawn Fiona
    124 Answers, 208 Upvotes
    03 Mar 2019

    The premiums for term insurance increase with age, so your total premiums paid if you have term insurance for your entire life may be higher in total vs. the total sum paid for whole life / limited-pay whole life plans.

    So it depends on what you want to cover. Cos not everyone buys term insurance for their entire life - when you're 60+, your parents are likely to no longer be around and your children are already grown up and earning income, so you don't have to support them anymore. Thus many people who buy term would consider to reduce their life insurance coverage at this stage onwards.

    Buying term during the stages of your life where you have the highest financial risks and dependents to support = the cheaper option vs. whole life. Even better if you can invest the difference.

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