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The most common question when considering Life Insurance

Many clients often ask me whether they should choose a term plan or a whole life (WL) plan for their coverage foundation 🤔.

 

TLDR: Whole life plans will be more suitable as a good foundation as it provides lifelong coverage. Depending on your specific needs and situation, a combination of both WL and a term plan might be possible.

 

From my mother’s and my combined four decades of experience, none of our clients have ever regretted purchasing a WL plan when it came time to make a claim. Their only regret is not having bought more coverage when they had the chance 🥲.

 

At first glance, term insurance may seem attractive due to its lower cost and higher coverage. However, it’s important to consider the following:

 

  1. Coverage Expiry ⏰

  • Term plans provide coverage for a specific period. Once the term ends—often at an older age when protection is most needed, the policy expires.
  • Many clients use term plans to cover temporary financial obligations, such as a mortgage loan, since both have defined timeframes.

 

  1. Premiums “for Life” 💸💸💸

  • As long as you need coverage, you must continue paying premiums.
  • Some term plans offer coverage up to age 100, but their premiums can be significantly higher, sometimes even exceeding the cost of a WL plan.

 

  1. No Savings Element 🚫💰

  • If a client forgets to pay premiums, the policy lapses, and a new plan must be purchased based on their current age and health condition.
  • In contrast, WL plans accumulate cash value, which can be used to pay premiums temporarily if needed.
  • A WL plan also serves as a form of forced savings, similar to CPF, which can be useful if one hasn’t saved enough for retirement or if investments don’t perform as expected.

 

  1. “Buy Term and Invest the Rest” Strategy ☂️+ 📈💹

  • This approach can work, but it requires discipline to consistently set aside and invest funds.
  • The success of this strategy depends on choosing the right investments that provide stable returns.
  • Building wealth through investments takes time, and market fluctuations add risk.

 

A Simple Analogy

Think of purchasing a term plan like renting a home, a temporary solution. As long as you need a roof over your head, you must keep paying rent. No matter how much you pay, the property will never be yours.

 

On the other hand, buying a WL plan is like paying for your own home 🔑🏠. The initial years may require a financial stretch, but once the premiums are fully paid, you get to enjoy lifetime coverage without additional payments.

 

So, would you rather rent or own?

If you prefer to take a bet against the insurer, a term plan might be an option. But if you want guaranteed benefits, a WL plan ensures that either you or your beneficiaries will receive a payout, providing long-term financial security.

 

In summary

Do not be enticed to go for the cheapest solution, such as a term plan. Understand your situation well before you search for the plan that best fits your preferences and concerns.

 

I hope that what I’ve shared will bring insights to guide you on your financial planning journey. Should you have any questions or feedback, feel free to drop me a message! (or follow me on Instagram: @gabbielim)

 

Disclaimer

Important: The information and opinions in this article are for general information purposes only. They should not be relied on as professional financial advice. Readers should seek independent financial advice that is customized to their specific financial objectives, situations & needs. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore. Any views, opinions, references, assertions of facts and/or other statements that I may set out on this social media account or otherwise are personal views and not necessarily the views held by Financial Alliance Pte Ltd. 

 

Important: The information and opinions in this article are for general information purposes only. They should not be relied on as professional financial advice. Readers should seek independent financial advice that is customised to their specific financial objectives, situations & needs. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.

Published By:

Gabriel Lim

Gabriel strives to provide a positive impact to his clients, as well as the people around him. The values of honesty and integrity have been deeply entrenched in him from young, and he strongly believes in transparency and providing only impartial unbiased advice, something which he feels he can make a difference in the industry.

Having graduated from Singapore Management University with a Bachelors of Business Management, Gabriel Lim has chosen the path of becoming a financial consultant under Financial Alliance.

He constantly works to improve his skills and knowledge of the business with the goal of being the most valuable asset in financial planning to all his clientele. This is captured by his firm belief in providing his clients with peace of mind, to help bring them one step closer to achieving all their financial goals in life.

 

To find out more about Gabriel, click here!

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  • 鑫盟理财私人有限公司( “鑫盟理财”)持有由新加坡金融管理局(“MAS”)所颁发的牌照，并许可在新加坡共和国境内依据财务顾问法（第110章）和证券与期货交易法（第289章）进行财务咨询等相关业务
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In compliance with the Personal Data Protection Act, Financial Alliance Pte Ltd (“FAPL”) seek your consent to collect and use your personal data (e.g. name, NRIC, contact numbers, mailing addresses, email addresses and photograph) for the purposes of and in accordance with FAPL’s Data Protection Policy, which can be found on FAPL’s website at https://fa.com.sg/data-protection-policy/.

根据《个人数据保护法》，鑫盟理财私人有限公司征求您的同意向您收集并使用您的个人信息。鑫盟理财将根据公司的个人数据保护政策所阐述的用途使用您的个人资料（例如姓名，证件号码，联系电话，邮寄地址，电邮地址和照片）。 该政策可在本公司网站上查寻，网址为 https://fa.com.sg/data-protection-policy/.

By submitting this form, you are deemed to have read and understood FAPL’s Personal Data Policy.

提交此表格，即表示您已阅读并理解鑫盟理财私人有限公司的个人数据政策