Whole life insurance
Whole life insurance protects you and your family in the case when a breadwinner in the family dies. Whole life insurance usually covers you from the contract start date all the way till 100 years old. Premiums are leveled and death benefit amount is guaranteed. The contract carries cash value and can be surrendered to exchange for cash. Breakeven point for a life insurance is usually after year 20th. You should purchase a life insurance with sum assured that covers up 6 to 10 times your annual gross salary.
Why choose a whole life insurance policy ?
Life insurance provides the highest coverage when an insurable event such as Death, Disability or Critical Illness occurs. Traditionally life insurance is categorized into Whole Life and Term Life. The most important factor to consider in of purchasing a life insurance policy is that the product is mean to provide for those left behind in case of death by the policy owner. Knowing your dependents and love ones will be well taken of financially with a lump sum of money paid out certainly provide a peace of mind and assurance.
How does a Whole Life insurance policy works?
A whole life plan provides coverage for the entire life making it one of the best products for protection and saving. A part of the premium paid goes into investment by the insurer, ensuring a cash value built up after premium payment are made for a certain number of years allowing for withdrawal in time of extreme needs.
Coverage period: up to 99 or entire life.
Premium: The payment amount usually stays the same throughout the entire life.
Cash Value: Consist of a cash value generated through investment returns by the insurer. Cash value varies among the investment performance of individual insurer. Product allows withdrawal of cash value through a policy loan or termination of product. Cash Value consists of a Guaranteed and Non-Guaranteed component.
Payout: Upon Death, Total Permanent Disability, amount based on the higher of the coverage amount or accumulated cash value. Surrendering of policy can be done to receive a lump payout if applicable.
Advantage: Whole life policy ensures that premium stay leveled throughout the policy holder entire life, eliminating risk of premium hike for the same amount of coverage as the policy holder gets older. Accumulating cash value and riders are available, providing as a part of retirement planning.
Disadvantage: Whole life product may not be suitable for short or mid-term financial goals as the cash value built up over a long period of time and surrendering the policy terminates all intended coverage for the purchase of the whole life policy.
Is there any alternative type of Life Insurance policy?
Whole Life investment linked policy (ILPs) also referred to as ILPs have been gaining popularity for individual looking for protection and investment. As the product has the highest exposure to direct investment, the potential risk and return may be the highest as compared to traditional Life Insurance products.
Due to the nature of the product, ILPs are generally more advantageous toward those with a longer investment horizon as higher initial cost and market changes will result in high volatility of its cash value.
Coverage period: up to 99 or entire life.
Premium: leveled premium that may be suspended in the later years as the policy builds up a cash value from the investment units of the policy. Policy holder can increase/ top up for additional investment unit to increase investment unit of policy.
Cash Value: Fluctuates according to market value of the underlying invested funds, withdrawing portion of cash value allowed.
Payout: Upon Death or Total Permanent Disability, amount based on the higher of the coverage amount or accumulated cash value.
Advantage: A strong focus on higher potential return makes the product suitable for those wishing to take some risk in the form of investment.
Disadvantage: Product typically suitable for longer term financial needs as policy holder may be required to ride out market downturn and volatility. With increasing age, more units contributed in the later stage of life may be used to cover the cost of insurance coverage.
Is Life Insurance Policy suitable for me?
Whole life and term insurance are essential to every individual portfolio. MediShield Life or private medical shield plan may ease you financial burden should hospitalization or surgery be required, but Life Insurance lump sum payout can certainly help when an individual is unable to work or requires a few years to recuperate from an illness.