Posted on November 19, 2009 - by Jade
When is the best time to get a Whole Life Plan?
Photo by Wonderlane
I’ve often heard of this phrase – the earlier you get the whole life plan the better it is for you. Rather than taking the notion for granted, I decided to find out for myself what are the basis of this statement, and whether it is valid or not. So here comes “Harry”, and let’s follow his life-span to see at which point in time is it the best for him to get a whole life plan.
When Harry is a newly born infant (i.e. age 0), his parents will only have to pay $103.65 per month for a $100,000, 20-year-limited-pay, whole life plan. Now the advantage of this is: assuming that Harry was born a normal, healthy baby then there would be no problems with his health condition. His parents will be able to ‘lock-in’ his health status and to hedge against any possible changes that the child might have in the future. Also, as we shall see, this would be the only time when the premiums are that low. Never again will the premiums be that cheap.
So maybe his parents did not think it was necessary at that point in time to get a whole life plan then – when Harry reaches 5-years-old, the premiums would be $120.00 per month. At 10-years-old, the premium would have increased to $138.40, and at 15 years the premium would be at $162.90. When Harry is 20-years-old, the premiums will be $177.50. Read more…
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November 21, 2009
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createwealth8888 said:
Why the premium is low for child insurance because the probablity of claim against insurance is also low?
We should be buying thing that we need now and not because it is cheap now. If we really need it later, then don’t be too overly concerned that it will cost more later.
I believe toilet paper rolls will definitely cost more in 20 years time, why don’t we buy 20 years worth of toilet papers rolls and store them while they are cheaper now? Of course, you can argue, it has space constraint. Similarly, I can also argue that those dollars saved now can also be invested for compounding growth.
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December 5, 2009
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Lau said:
I agree with CW8888.
Although I am also in the line of insurance, there is simply too much sales hype of “If you love your child, you MUST get them insurance.”
Insurance is for risk transfer if you cannot bear the consequence. So for child, I believe the risk to transfer will be mainly hospitalisation. For Death & Loss of Income, not to sound cruel, but from purely a financial point of view, children are more of a liability, if death were to occur, the parents actually saved money.
Conversely, the one who needs to review their insurance needs more will be the parents. Many times when I review for clients with new born, they are more concern of their child coverage then their own. Priorities are all wrong.
Determine based on needs and the correct concept of insurance as risk transfer. Not solely on price and product, it is a life long commitment, not going to the market to buy vegetables.