Asked by Anonymous

What additional insurance should I get besides Integrated Shield Plan? Most recommend term-life and investing, but I'm uncomfortable with not having coverage after 65yo. Any comments on a whole-life plan with early critical care rider. 25-30yo.?

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  • Kenneth Lou
    Kenneth Lou
    Level 8. Wizard
    Answered on 18 Apr 2018

    Hi there! This is a good question that you asked. Here i the best way to look at it, I'm completely unbiased coming from a financial writer point of view, so you can understand that my article/comments has no sales pitch inside. It is referenced from this article: https://blog.seedly.sg/working-adults-what-are-the-key-insurance-policies-you-should-get-in-singapore/

    There are 2 types of pure essential insurance that anyone should get (if you can afford it)

    1) IP (integrated shield plan) which is an enhancement to the current MediShield government coverage (basically this plan is for when you get warded)

    • As you probably know this is critical, gets you to a coverage level which is beyond a B2 ward in a public hospital
    • You can and probably should cover up to A class ward or private level (as this opens up ways to choose your doctor, get faster service etc.)
    • Some people choose to add on the Riders as well to pay less deductibles, or co-payment

    2) Term or Whole Life (basically this is a payout in terms of death)

    • Term Life: This is a purely coverage focused product, where all your monthly/yearly premiums go into coverage, so at the end of 65 years old, you are no longer covered and there is no cash component to this. This is what most savvy people recommend because they know how to use the excess cash saved to invest for better returns
    • Whole Life: This is a mix of coverage product and savings component tied to it, where there is a cash value associated with your policy

    Why do people recommend BTIR (buying term life and investing the rest)?

    • It's because they are usually savvy and they find that instead of having some form of savings/cash value at the end of their life, they feel that they can get more returns than the usual 1-3% that the whole life plan will probably yield.

    Why do people not fear being not covered beyond age 65?

    • It's because when you draw out your life cycle, the wealth accumulation phase is usually between 20 to 55 years old
    • Beyond 55 years old, usually you would be in the wealth preservation phase (like retirement) where you would live off your nest egg (CPF and dividends etc)
    • Beyond 65 years old, if you have children, they will be able to take care of themselves most likely as they would be adults, hence all your debt (from housing, school loan etc) would have been paid fully, and you have no more 'financial burden' which will be passed on to them
    • That's the whole concept right there. :) hope it answers you as a whole!

    A whole life plan with Critical Illness rider:

    • I think this sounds like a decent plan, I personally have something similar (but with the AVIVA MINDEF group insurance for all NS men)
    • However, I would caution that you should consider not overly cover yourself via the whole life at the start, but instead use a hybrid of term in the earlier part of your life. Reasons as above.

    So it should look something like this:

    • Whole life with CI rider = $100k till the end
    • Term life (death) = $400k till 65

    *Note: Numbers are arbitrary but used to illustrate an example. The $ dollar values should be matching your amount of debt or liabilities projected.

    Fact: My own father just passed away from Brain Cancer (a critical illness) at age 54. So yes, all these illnesses are very real and it will most likely hit more people at a earlier age these days. (1 in 3 people get cancer today)

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  • Luke Ho
    Luke Ho, Money Maverick at Money Maverick
    Level 6. Master
    Answered on 24 Sep 2018

    One of the weaknesses of a Buy Term Invest the Rest with Early Critical Illness (ECI) involved is that Term ECI is so disproportionately expensive that BTIR is an incredibly risky move.

    The math, when comparing the whole life plan rider to it's term 'benchmark' would require the invest-the-rest result to be about 6% annualized, which can be difficult to swallow for conservative investors and incredibly hard to achieve for undisciplined people (which is more likely even if you're good at investing).

    Take this example (as an FA I'm discouraged from naming specific companies or plans)

    It costs $1001 for this ECI Term plan for a 35 year old till 70 (34 year term).

    For a 20 year WL + ECI (manipulating the multiplier), it costs $1432.

    Total premiums paid for WL: $28,640

    Total premiums paid for Term: $34,034

    Cash value at 70 for WL: $29,000

    Cash value at 70 for Term: 0

    So assuming you don't claim, you pay $5000 less and get back $29,000 after 70 if you need it.

    Yes, you could certainly invest the difference, but the difference isn't huge. So between the discipline, skill and small capital - it's challenging. If you''re up for the challenge, I can help you with that as well.

    I'd love to help you if you let me. You can reach me via PM-ing me the link below.

    https://www.facebook.com/luke.ho.54

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  • Brandan Chen
    Brandan Chen
    Level 5. Genius
    Answered on 20 Apr 2018

    It would be good to prioritise coverage for Critical illness, Death and disability prior to investments. This is to provide you with a minimum safety net should anything unfortunate event occurs while you continue your journey of wealth accumulation.

    As for extending coverage beyond 65, there are term plans that provide coverage beyond 65.

    As you are currently 25 to 30 years old, premiums for Whole Life Plans tend to be more affordable, and offers you a limited pay option of 10, 15, 20, 25 years so that u only pay premiums during your working years to obtain coverage for the rest of your life.

    As for Whole Life Plans with early critical rider, please do take note of the fine print for the maximum amount claimable should a critical illness be diagnosed by a doctor.

    Disclaimer: I am a financial planner with Manulife. You may PM me on Facebook to find out more

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