When to buy Whole Life Insurance Singapore
Why should I consider a whole life insurance policy in Singapore?
Then who is the clear winner?
Unfortunately there is no clear winner. This is simply because we all have different needs and expectation. Therefore, it is impossible to have a one-size-fits-all policy, disregarding our actual situation.
So when should I consider a whole life insurance policy?
Here are three situations when you should consider a whole life insurance policy:
1. Premium Term
Firstly, most whole life insurance policies feature a limited pay option. In other words, the insured will pay the insurance premium over a fixed period, e.g. till age 45. Thereafter, he will enjoy the insurance coverage for the rest of his life (i.e. till age 100, by industry standard).
This feature is important during our budget planning, especially during our income years. While we are working, we will be able to afford the cost of insurance. However, what happens when we stop working?
Will our savings be sufficient to pay off the insurance premium for the rest of the premium term?
Additionally, some of the insurance charges are non-guaranteed. With this in mind, it is always sensible to complete the premium term as early as possible.
2. Coverage Period
In most cases, a whole life insurance policy will have a longer coverage period as compared to a term insurance policy (e.g. till age 75). Accordingly, the question is,
What happens after our coverage got terminated earlier than it was supposed to be?
There are two possible endings for this:
- Intention to continue our insurance coverage: We are now forced to pay a significantly higher premium. Furthermore, can we guarantee our health condition to be insurable then?
- No longer insured: Do we have sufficient life savings when something happens to us?
On the other hand, a whole life insurance policy ensures that we will be properly insured for as long as we are alive.
3. Cash Value
I tend to describe a term insurance policy as a bottle of champagne. 🍾 In this case, we are buying an exotic bottle of champagne for the insurance company. Later in our lives, two scenarios can happen:
- A covered event occurs during the coverage period: Insurance company issues us a cheque for the insured amount.
- Nothing happens at the end of the coverage period: Insurance company will pop the champagne and celebrate our life.
On the other hand, I like to use the analogy of a car’s airbag for a whole life insurance policy. 🚘 In every car, it will arrive with a pre-installed airbag. Whether we like it or not, it will be part of the total cost that we pay for the car. As usual, two scenarios can happen later on:
- A covered event occured during the coverage period: The airbag will save our family from financial distress.
- Nothing happens at the end of the coverage period: Uninstall the airbag and sell it back to the insurance company for cash!
If we want some form of certainty in our insurance portfolio, then consider a whole life insurance policy. On one hand, it ensures that we will be able to pay the cost during our income years. In the event when we face financial difficulties, there are contingency plans available within the plan to protect our insurability interest.
While a car is a poor asset, a car’s airbag can be a pretty valuable asset over time! 🤩
Thoughts of the Day 💭
- Do you own a term insurance or a whole life insurance policy?
- What are your considerations when getting an insurance policy?
- How much money did you spend on your life insurance policy?
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