Asked on 24 Apr 2019
26 years old
WL Premium: $130/mth. Had paid for 3 years.
Coverage: Death/TPD/CI:$150K,drop to $50k after 65.
Early CI: $87.5k,drop to $35k after 65
Surrender value @ age 65 (@3.25%) : ~$32.5k
Coverage: Death/TPD/CI:$150K (fixed) No Early CI
Surrender value @ age 65, 4%: $120k (non-guaranteed)
Allowed to withdraw funds in times of emergency after 2nd yr
If I surrender my traditional WL, loss =$4,680.
Need some advice. Thank you.
Hey Anon, first off you're comparing apples and oranges when looking at a traditional WL vs an ILP.
WL plans have level premiums, which means that cost of insurance won't get more expensive as you age. ILPs have increasing cost of insurance and would become unsustainable in old age as you'll be deducting the cost of insurance from your investment units.
This, ILPs aren't that suited for whole of life cover due to this.
If you want coverage for whole of life, stick to your WL plan. If you want more, you can buy another one.
WL plans also have guarantees, ILPs are 100% non guaranteed and have to be closely managed by either yourself or your advisor.
I also probably think that you have some fundamental ideas of insurance a little off. If your advisor is advising you to replace the WL with an ILP, lose ECI cover, pay higher premiums, plus take on more risk on the variable return, I think its a bit of a red flag.
1 more comments
Brandan Chen, Financial Planner at Manulife Singapore
Answered on 25 Apr 2019
Same thoughts as Hariz.
For WL, you would be getting ECI cover and a fixed premium payment term. However for the ILP which your advisor suggested, you lose ECI cover and it's not guaranteed that you would be able make those returns.
The advice provided by your advisor doesn't make sense. What if one is down with ECI? Does your advisor also suggest that you surrender your ILP to meet your expenses?