You will often hear friends or relative discussing which is better, Term or Whole Life Insurance? I would say it depends on context.
You will need to filter away the noises come from insurance agents who try to sell you a plan that is difficult to unwind or advice from well-meaning friends and relatives. How?
First, let us understand some fundamental differences between a term and whole life plan:
| Benefits | Term Plan | Whole Life Plan |
| Death/Early Critical Illness/Total Permanent Disability | Pay out only within the term period stipulated in the policy document. | Benefits pay out during the lifetime of the insured. Do note there are some plans provide coverage up to age 99 only even though it is called a Whole Life Plan. |
| Savings/Investment Element | Non. | Offers both insurance and saving/investment elements. |
| High Coverage at low cost | Yes. | Usually gets very expensive if you require high coverage. |
| Terminating the plan | More flexible and straight forward. You can terminate the policy without incurring big losses. | Policy holders have to mull over the cash value of the plan. May not be able to recover the entire saving portion of the policy especially in the first few years. |
A consumer has to consider his/her circumstance when planning to procure an insurance.
Of course, my emphasis here is context, so you must ask yourself hard questions. I will not dispense recommendations here but share with you my thought process:
1. I tend to decide on my budget first. This has a lot to do with my experience in corporate finance. I tend to be very budget focus. No point buying something which I will have difficulties servicing the premiums payment down the road;
2. How much coverage do I need? Can I realistically get a Whole Life plan with the budget I have? Or am I able to get the coverage or near the coverage I need with a term plan with the same budget?
3. Do I need Life coverage or just to meet my insurance need for a limited period say until reaching my intended retirement age?
4. Do I need the saving/investment element, and does it make sense considering what I can afford at the point in time?
5. Does the saving/investment element offer by the policy meet my investment objectives and time horizon?
Buying insurance need not be a difficult process. All you need is to ask yourself hard questions and be clear what your intentions is. Your financial planner should be able to guide you through in establishing your financial objectives and milestone and incorporate them into your insurance needs.
You may contact me via WhatsApp 8750 8966 for an in-depth discussion on your insurance needs.
Disclaimer: All information are for informational purposes only and should not be relied upon as financial advice.