I’ve previously written on why I cancelled my investment-linked policy (ILP), and provided another reason based on the way allocations are seemingly done in ILPs.Since then, I’ve only been getting much flak (mostly from insurance agents) about my stanc…
Category: SG Budget Babe
Get 1.8% – 2.13% p.a. realistically on the first S$100,000.Salary crediting is a precious commodity. Many of the banks reward you if you do credit your salary into your high-yield savings account with them, but with so many options and only one salary …
Which is better when you need life and critical illness insurance – BTIR or a whole life plan?
A part of being financially savvy involves outsourcing your biggest (financial) risks to a third party (an insurer), but you’d want to make sure you get the best coverage that you need for the least amount of premiums.
But when should you review your life insurance plans? Here are the different life stages where it’ll be good to review your protection coverage and what you need:
- When you get married (increase protection)
- When you have kids (increase)
- When your parents are no longer around (decrease)
- When your kid gets their first job (decrease)
However, it no longer becomes so simple when you add in coverage for critical illness (CI). I compare the difference here.
If we presume that the couple wants to purchase life and critical illness insurance for their kid(s), then the couple would potentially be looking at the below instead.
|*I looked at WL + CI + ECI for our kid.|
The above table shows how much a family needs to set aside each month for insurance premiums, depending on their preferred plans and number of children.
The assumption here with the BTIR approach is that you invest the remainder of premiums you would have otherwise paid on a whole life plan, and create your own cash pile to tide you over should critical illness strike.
The next question to ask yourself is, even if you invest the rest and do moderately well, will you have the discipline to set aside the sum for your retirement + critical illness coverage instead of spending it on holidays (or anything else!) now?
In our case, for the same coverage of $300k, the cost comes up to:
*Coverage for VivoAssure (WL) becomes $100k guaranteed sum assured plus bonuses after age 70, as I opted for a 300% multiplier till then.
*We opted for a limited pay (20 years) on WL which translates into annual premiums being higher in the short term i.e. during our prime working years. Paying till our 60s would equate to a lower annual premium ($2k+) but the total premium paid is then so much higher, which doesn’t make sense to us.
The upfront monthly premiums are more than double if we opt for the WL+CI route, but the total premiums are only about $7k – $8k in difference, which is not much in the grand scheme of things. Between opportunity cost and ease of mind, which would you prefer?
So a term plan till 100 would address this, while still benefitting parents who are looking to leave a legacy for their child, but cannot afford the higher upfront costs of whole life plans.
TLDR / Summarised Thoughts
There’s certainly an argument to be made for getting whole life + CI plans for the whole family of 3, but only if both parents have financial leeway to pay about $750 in premiums each month.
Otherwise, getting term+CI on the parents and WL+CI for the child would cost lesser at $420 a month – almost 45% cheaper.
To sum it up, here are some general observations from reviewing the family’s insurance coverage recently:
1. If I want life and critical illness coverage, the difference in total premiums between a term and whole life plan is hardly much (less than $8,000).
- That’s much lesser than I expected, and in this regard, it seems like a whole life plan offers more value and peace of mind, for the trade-off of more expensive premiums upfront for a shorter payment duration.
2. A whole life plan for one’s child is a great gift to ensure guaranteed insurability and cash, provided the parents can afford it.
- In the event of critical illness, the sum paid out can also allow one parent to potentially quit work and stay home to care for one’s child.
What should you decide? As always, evaluate first your needs and budget.
While it sounds great to have as much protection as possible, affordability should your primary consideration because there’s hardly any point to run into debt just to get insurance. While stuff like leaving behind a legacy sum for your child and guaranteeing your child’s insurability is no doubt important, these are secondary if you don’t have enough cash on hand to maintain the premiums.
Differentiate between your needs and wants for insurance based on how much you can afford, and then choose the best plans for you.
Disclosure: This article was sponsored by NTUC Income, so the examples used are their plans, which are also among Singapore’s most competitive. However, for a detailed quote and financial planning, you’re encouraged to seek out a trusted advisor instead of making your decisions regarding insurance purely based on this article, or any other articles you read online. Premiums used in this article are for myself, my husband and my son respectively, so they may or may not be reflective of the premiums you will need to pay for your case as your age, smoking status, medical history, preferred sum assured, riders, and more will likely vary.
*** Sponsored Message by NTUC Income ***
Whether you prefer term or whole life insurance, we’ve got you covered. Want a term plan? TermLife Solitaire covers you for $500,000 coverage (or higher) with competitive premiums.
Want peace of mind with a whole life plan? Check out VivoAssure (with Advanced Assure Accelerator rider), which not only covers you for life, but also guarantees you protection against unknown diseases as long as you undergo surgery or suffer from infection, and require a stay of 5 days or more in ICU. Not all diseases are known, and we’ll cover you against even the unknown so you can sleep peacefully at night.
Show your family how much you truly care. Protect them with a NTUC Income life plan today.
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