Asked on 15 Sep 2019
(ANB 32) I have set an annual budget of $6500 for my insurance needs. Planning to get a $200k WL plans with ECI & CI, and 700k (SAF GTL) term coverage till 65 and invest the balance and hoping to make use of compounding interest.
For the WL plan, should I opt for 10, 15, 20 or 25 years? The quote I received for 10 years is about $4100 per annum while 25 years is about $2500 per annum
ie.Option 1: if I were to get 10 years plan I will only be left with (6500-4100-344) for investment.
Given your age, I would opt for 20 or 15 years at most. The most important thing is to ensure that you finish paying premiums during your working life. The difference between 25 and 20 is not usually too much, although the difference between 15 and 20 might be steeper. Between 15 and 10, the difference might be too steep.
Also, if you took option 1, it may be that you are not having too much for investing now, but your $4100 commitment will end in 10 years, freeing up more budget for investing. So you will likely need to strike a balance. Not forgetting that as you continue to work, your salary will increase and you will be able to have more funds to invest. It is all about striking a balance.
Lastly, do ensure you get a quote across multiple insurers in order to ensure you are getting your coverage at an optimal cost. You might want to consult an IFA like myself for this.
The longer you stretch your payments, the less they cost due to Time Value Of Money.
But the difference in total premiums from 20 to 25 can be quite a sum.
I'd opt for 20 years.
1) Total premiums paid will definitely be lower for a lower premium term
2) A key consideration for selecting a time-frame would be cash flow and opportunity cost
3) Personally, I would opt for 20 years to stretch my dollar as far as possible
4) Another scenario is whereby an ECI occurs 11 years into the policy, for a 10 year premium term, you would have fully paid up the policy! However, if you selected a longer premium payment term, u would have paid lesser but yet still receive the same payout!
5) Personally, I would concentrate on setting aside more for investment! Insurance is merely a risk management tool! Investing/savings is what determines your retirement and future lifestyle!
6) If you would like to find out more about Manulife's whole life plans which cover 126 conditions, and comes with 6 months premium waiver upon Retrenchment. Feel free to drop me an email at [email protected]