Asked by Anonymous
Updated on 18 Apr 2019
Understand that the different between term life & whole life plan is that one has cash value & the other doesn't have. 1) Other than that, what are the both benefits? 2) Is it true that, an affordable person should have both term life & whole life plan at the same time? 3) What is the advisable way to do, if the whole life plan maturity has reach and will it still be protected after 70 since it is a whole life plan?
1) All Whole Life plans mature after Age 99 (at 100), so you are covered till 100.
2) If you strongly believe that you can manage your finances, and WILL invest the rest of the premiums, BTIR is good especially if you can hit more than 4% year on year (6% for ECI).
3) Whole Life Plans (especially limited pay plans) negate the rising cost of the ECI/CI plans by a 20 year limited. So it helps you to resolve the cost issue, though, it will definitely cost more than a term ECI/CI earlier on.
In terms of time value of money, as mentioned, you need 4% (CI) or 6% (ECI) to beat the premiums paid when you BTIR, vs Term life.
4) Its never Term or Whole, but rather, how much you really need. If you do not need any insurance protection after 65, then just buy term.
I will just state the obvious:
Option A - high-level of discipline + medium to high-level of financial knowledge, go for Term
Option B - Any others, go for WL. A lousy plan is still a good plan than no plan (Monies just fly to somewhere, a blackhole which you never get to see)
I will build on what Tat Tian has shared.
1) The main difference, besides cash value, is also the premiums. Another factor to consider is also your current age, if you are above 35, generally speaking, whole life plan premiums may be way more expensive.
2) Most importantly, you should consider what you need in terms of the various coverage. As a general rule of thumb, 10x Annual Income for Death/Permananent Disability and approximately 5x Annual Income for Critical Illness. You may also consider taking up 1 - 2 x of your annual income for Early Stage CI.
3) As for what would work best, it really depends on your investment skills and options. If you are able to generate the returns as per what Tat Tian has mentioned, you may consider going for a Term plan and put in the conscious effort to Invest the Rest.
4) Whole life as the name sounds only matures at age 99/100. I guess the Age 70 you are referring to is likely the multiplier effect which means the coverage for post-70 will be based on the Bonus plus Base coverage.
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