During the NTUC Income 40th Year anniversary dinner held in October this year, Senior Minister Mr Goh Chok Tong encouraged the insurance industry to place more emphasis on term insurance plans while he addressed the protection needs of Singaporeans. His words came timely because according to a research conducted by Nanyang Technological University in 2009, Singaporeans has an average cover of only $165,628 upon death, after taking account of mortgage insurance payout and CPF savings when their average needs should be $494,851. It was revealed in separate surveys that Singaporeans have the perception that getting insurance protection is costly and beyond their affordability.
If cost is really a concern, then term insurance can be a good way to address this problem. Through term insurance, we can get our immediate needs covered at affordable premium which means freeing up more financial resources towards other needs such as saving for retirement ......
How about 4-5% returns on a whole life insurance ?? If NTUC insurance or some other insurance company can offer 4-5% returns for your whole life insurance coupled with critical illness, then the debate of whole life vs term insurance will be more interesting.
A Whole Life plan is very unlikely to give 4-5% returns with the type of investments they are able to put in for their Life Participating Funds. They are restricted in what they are able to invest. If we are to mirror the type of investments a life participating fund invest compared to what is available in the retail market, I believe the actual returns might not be that fantastic as well.
I’m not a big fan of Whole Life plans but I believe that whole life plan in part of our risk management do make the portfolio more robust in some ways if affordability and liquidity are not major problems.
It is important that we know how to weigh our priorities. I consider Term Insurance as a better option to cover our immediate needs. Whole Life plans are more for continuity of coverage if our strategy is not on setting aside another fund consciously for self insurance when we are old. Its meant for future problem and not immediate problem. As a financial planner, I will help my client with immediate problem first and find ways to solve future problems.
Do not let agents convince you to take care of future problems by just Whole Life policies and forget what our immediate and short term problems are. Do not just look far as we may stumble if we ignore what is near us.
I do agree with Adrian that the returns of WL plan can be pathetic. WL plans to me are a form of insurance rather than a form of investment.
I have a WL and a limited paying WL plan. The former is bought by my parents more than 15years ago, hence I don’t see a point in canceling it. The other one was bought for critical illness coverage for life. I have to pay for 20years and the insurance coverage is for life. Sounds like a pretty good deal and I must stress again that I am not expecting any returns for this plan even though there is.
I also agree with Adrian.
Although i have insurance too but i only buy the essential ones.
Otherwise u give money to them, they also take your money to invest in stocks/property….so might as well i do it myself haha