While term has its merits, it also has drawbacks (no cash value so it can lapse) and some don't cover for life. I was glad I had got whole life insurance when I was young and healthy. Now I can't buy any more due to medical problems. I also had to stop paying premium due to financial difficulties along the way but my policy did not lapse because of the accrued cash value.
Most people won't think insurance is a necessity until they need it. I had the same thought before (no significant medical history in my family) but the fact that the policy has cash value that can help me save up for retirement led me to sign up anyway. The thing about insurance is you can't buy it when you need it. So do get insured while you are young. If you are lucky to be in good health, you can afford to wait but what if you are not lucky? Can you take the risk of not being insured or would you rather bear the relatively more affordable premium instead?
Wow this sounds almost exactly like what an insurance agent will say... so persuasive, my willpower is weakening... quick, I need to chant the magic words .... FA ... TA... FA .... TA.....
This is why I say that the above sounds like what an agent will say:
(1) quickly dismisses low-commission term plans with "no cash value" and "don't cover with life." Ignoring the concept of "buy term and invest the rest."
(2) instill fear into client with stories of dread disease and illness, perhaps tell stories about some fictitious relative or client.
(3) the overly expensive ILP suddenly looks 'affordable' when compared to the prospect of having critical illness and no insurance.
All of this has been discussed before.
A "dividend warrior" investment plan + Term + hospitalisation is a better alternative for those that are willing to learn to DIY. With the power of CD/compounding/and occasionally lucky capital gain, a $1m share portfolio yielding $4,000 a month dividends is achievable.
Inflation will quickly destroy the value of your whole life policy - use your calculation - Life policy with sum assured of $200,000 seems big (actually its the premiums that seem big), but factor in 5% inflation, how much will $200,000 be worth when you are 65? Yes you get bonuses but they won't match inflation. I confess, I have a small life policy, got conned when young into signing, so I can see the bonuses added to the sum assured, don't add up to much.
On the other, the share portfolio is likely to grow and match the inflation rate. This is because large corporations and reits are able to raise prices to match inflation and thus their revenue will match inflation.
Finally, the share portfolio can be handed over to your children and the stream of dividends is forever. The stream of income/annuities/payments from insurance policy stops on death of the insured.
