Whole Life Insurance

A mix of coverage and savings components

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Term Life Insurance

Whole Life Insurance

Insurance

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.

Insurance

Whole Life Insurance

I would always urge people not to surrender their policies. Go back to the insurer, get a updated Benefit Illustration, and see what is the current IRR (internal rate of return) for the life insurance, while also understand do you require the death benefit of the plan. If you do not require it, then you can do another calculation to see if it is still worth to hold on to the insurance. You may want to hire my services to see the report. https://www.qoo10.sg/item/AFFORDABLE-PROFESSIONAL-CONSULTANCY-SERVICES-FOR-INSURANCE-POLICY/646088766?bannerno=1305330 Does the return of the insurance bring any meaning to you? Is it growing at a higher rate than 4% risk free (Hint: CPF SA) But if really, you wish to surrender, do contact me either on facebook, or look for your FA to get a better surrender value at the secondary market. ( https://www.linkedin.com/pulse/where-did-tep-tlp-traded-endowmentlife-policies-come-loh-tat-tian/)

CPF

Whole Life Insurance

Definitely insurance will pay out more in the event of death than a pure investment vehicle doing 4% return. But let's show the proof. I'll be using Manulife LifeReady with a base sum assured of $500k for a Male Age 30 this year with no multiplier. You'll be paying 8300/yr for 25 years. Total premiums paid $207,500. By age 75, your death benefit will be a projected $1,163,075 of which $663,075 is non guaranteed giving you a XIRR of 5.30%. Now, if you invested that $8300 over 25 years and let it roll until 75 with CPF SA and get a pure 4% return, you'll get a guaranteed $757,386 by age 75 about $400k less. But even if you don't die, and decide to surrender your policy at age 75, you'll have a projected Surrender Value of $794,484 of which $452,984 is non-guaranteed which is also more than CPF SA. Here are a few things to consider: 1) The additional payout above $500k on your WL policy is non-guaranteed. If you're conservative, you can expect half of the projected bonuses which will give you about $830k upon death at 75. 2) CPF SA will be emptied to pay for CPF Life premiums and not all of that money will continue to receive a 4% return after age 55. 3) CPF SA monies are untouchable before age 55. WL policy gives you access to your monies, albeit at a price. 4) If you die way before 75, you'll get a minimum of $500k while you may only receive just a little bit more on your CPF savings. 5) If you're investing and expecting a payout only when you die, insurance would be a better tool. But anytime you want money while you live, then it may not be the best. Other tools can give you more liquidity with similar risks (and no I'm not talking about CPF SA either). 6) It's not a super fair apple to apple comparison, and it shouldn't be an absolute one over another. They have different uses. Some of your money should be in a government pension plan, some in insurance, some in equities, some in bonds, and some in real estate. Having a good mix is having a balanced portfolio.

Insurance

Whole Life Insurance

Endowment Policies

Term Life Insurance

Brandan Chen
Brandan Chen, Financial Planner at Manulife Singapore
Level 5. Genius
Answered on 08 May 2019
I am an Advisor with Manulife, but due to MAS regulations, we arent allowed to provide any recommendations online without having a full understanding of your profile. However, I can break down the basics for you via this comment. Firstly, we should first understand how much coverage we require for both Early CI and Late CI. Typically, we would suggest a coverage of about 5x of your annual income for coverage. For Early stage, typically about 1 - 2 x of your annual income. Secondly, what are the options available. There are typicall 3 options for you to take up. Whole Life Plan with ECI & CI rider, Term Plan with CI Rider, Multi-claim CI plans which is a term plan that only covers CI but allows for one to claim multiple times. Thirdly, What is your overall budget? My suggestion is that you should NOT spend more than 10% of your income on all your insurance including your health insurance and Personal accident insurance if any. Things to look out for: 1) No of conditions that are covered. For Manulife, we cover a total of 106 conditions, which is one of the more comprehensive CI plans in the market 2) Fine print on the definition of the conditions 3) For Multi-Claim CI, it would be good to take a look at the structure from the various insurers. Some insurers provide 0 waiting period for their ECI claims but do not allow you to claim from the same category of CI again, whereas some may have a waiting period of 1 year for multiple claims but yet do not restrict you in the category of CIs. In conclusion for Critical Illness plans, you may either get a combination of Whole Life and Term, or a Multi-claim CI plan depending on your budget and preference! As for endowment policies, there are typically 2 types, those with flexibility and those without. More often than not, the endowment plans with flexibility tend to generate lower returns as compared to those without flexibility. More importantly, before deciding on an endowment plan, do understand your current risk profile and your savings/investment objective. There are plenty of options for you to grow your money. You should definitely speak to a financial advisor to find out more! Lastly, feel free to connect with me via my email at [email protected] if you would like to have a further (non-obligatory) discussion on your personal financial planning.

Insurance

Whole Life Insurance

Loh Tat Tian
Loh Tat Tian,
Level 6. Master
Answered on 14 May 2019
That;s a fantastic way to look at the whole life and conversion to annuity. But before he do that, best to do IRR calculation (internal rate of returns) based off CPF Retirement Sum Scheme of average 4% to 6% returns. If its CPF life, you may wish to consider other type of vehicles that can give somewhat dividend returns, or structure in a way that you can contribute into his RA (while he draws out some), since you will see the money. An annuity normally only has about 3%, which may not be a good wealth preservation in this case.

Insurance

Whole Life Insurance

Investment Linked Policies (ILP)

Brandan Chen
Brandan Chen, Financial Planner at Manulife Singapore
Level 5. Genius
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?

Insurance

Term Life Insurance

Whole Life Insurance

Brandan Chen
Brandan Chen, Financial Planner at Manulife Singapore
Level 5. Genius
Answered on 16 Apr 2019
Insurance is meant to be a tailored solution to fit each individual needs. Term is most cost effective for Death/Disabilty coverage, whereas for CI & ECI coverage, Whole Life may make more sense. Like what Hariz mentioned, its really not about Term or WL but rather what combination would fit both your needs and budget. Perhaps you should speak to a financial advisor that is able to provide you with proper advice. Alternatively, you may always reach out to me via https://www.facebook.com/brandan.chen

Whole Life Insurance

Term Life Insurance

Insurance

SeedlyTV EP01

I have whole life for 1-2 year annual income coverage, and a term for 5 years annual income which include CI. I do the base WL, and a term top up for high liabilities (between age 30 to 55, where your kids etc are still depending on you). For your case, it depends on your situation.

Whole Life Insurance

Term Life Insurance

Insurance

Instead of looking at premiums, look at coverage. You should have 10-15X your annual income as Life Cover, 3-5X your annual income as income protection (CI). If you're making 50k a year, that's 500-750K in Life Cover and 150-250K in CI coverage. If you're covered for more, you may want to decrease your cover. Typically, if you're covered for the above amounts, you should be paying 8-12% of your monthly income in life insurance.

Early Critical Illness (ECI)

Critical Illness (CI)

Whole Life Insurance

Insurance

To answer your question, you need to look at the total coverage you require. The rule of thumb is around 10 X your Annual Income in the event of Death and 5 X your Annual Income in the event of Illness. Top up accordingly. However, I suggest to skip on the CI coverage provided by the Mindef Aviva Group Term plan as premiums change as you age and their ECI list of conditions covered is not comprehensive.
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