Insurance or Investment for Legacy Planning?

[edmund77]

Hi, I need advise from the experts here.

Currently I have 2 PruTerm Vantage policies & an Aviva SAF GTL to cover my mortgage loans. I'm thinking of getting another $1m term insurance for legacy planning (cash inheritance for my children or grandchildren).

The quotation that I've received from the bros here for my age now till anb 99 is about $5-6k annually.

The topic for discussion is whether I should just invest the $5-6k amount annually, or to get the $1m term insurance.

Assuming a return of 10% (S&P 500) compounded annually, investing $5.5k for 30 years will generate about $1m.

Based on the life expectancy for male Singaporeans and my income flow, I can expect to invest for 35 years and if that is the case, I should be able to get more than $1.6m. Does it mean I should invest instead?

 

[kzonexx]

Hi, I need advise from the experts here.

Currently I have 2 PruTerm Vantage policies & an Aviva SAF GTL to cover my mortgage loans. I'm thinking of getting another $1m term insurance for legacy planning (cash inheritance for my children or grandchildren).

The quotation that I've received from the bros here for my age now till anb 99 is about $5-6k annually.

The topic for discussion is whether I should just invest the $5-6k amount annually, or to get the $1m term insurance.

Assuming a return of 10% (S&P 500) compounded annually, investing $5.5k for 30 years will generate about $1m.

Based on the life expectancy for male Singaporeans and my income flow, I can expect to invest for 35 years and if that is the case, I should be able to get more than $1.6m. Does it mean I should invest instead?

to get that expected return, u need to live for 35 years. Insurance is for those who don't know when death happens or think that can die anytime.. u'll get the payout even if u die today/tomorrow. Dat is what u pay for.


If compare returns at the end of 35 years, no brainer to go for investment.

 

[soneat]

Hi, I need advise from the experts here.

Currently I have 2 PruTerm Vantage policies & an Aviva SAF GTL to cover my mortgage loans. I'm thinking of getting another $1m term insurance for legacy planning (cash inheritance for my children or grandchildren).

The quotation that I've received from the bros here for my age now till anb 99 is about $5-6k annually.

The topic for discussion is whether I should just invest the $5-6k amount annually, or to get the $1m term insurance.

Assuming a return of 10% (S&P 500) compounded annually, investing $5.5k for 30 years will generate about $1m.

Based on the life expectancy for male Singaporeans and my income flow, I can expect to invest for 35 years and if that is the case, I should be able to get more than $1.6m. Does it mean I should invest instead?

My 2 cents.
1. You currently have 2 PTV. How much is the sum assured and till what age? If both are 1m each and its till 100yo, you got to consider the following:
i) Policy Owner Protection Scheme only covers up to S$500k
ii) Do you have sufficient cash flow to sustain the premium for life?
iii) In view you already have 2 x S$1m coverage, do you need another?
iv) 1 x S$2m or 1 x S$3m policy likely to have a better rate than 3 x S$1m policy. (But depends how long ago u bought your PTV too).

If you do not have any 1m till 100yo/99yo term policies yet, it maybe good to consider one but take note:
i) Aviva offers perpetual discount from time to time. Last year Nov-Dec, they offered a whopping 30% perpetual discount. Hence you might want to monitor their promotion.

Nett nett, if you r in your early 40s, financially doing well, have healthy cash flow, have property(or properties) and multiple sources of income/investment, then having a S$1m term policy to 99yo/100yo is not uncommon. However if the premium is 5.5k like you mentioned, then probably not worth it. If there's promo to bring it down to 4k, you can re-consider.

 

[joshua182]

the choice is obvious! split up your money! get some term, invest the rest!

dont be fixated on the 1 million mark, you need to consider all the risks of what you are doing! the insurace company may not stay afloat in 30 years time, sure most and many have been around for centuries but these are highly leveraged times we live in with too much debt running on nothing at all!

buy the index, buy your term, do both'

 

[edmund77]

the choice is obvious! split up your money! get some term, invest the rest!

dont be fixated on the 1 million mark, you need to consider all the risks of what you are doing! the insurace company may not stay afloat in 30 years time, sure most and many have been around for centuries but these are highly leveraged times we live in with too much debt running on nothing at all!

buy the index, buy your term, do both'

Currently I've term policies but those are to cover my 3 mortgage loans. Recently a friend mentioned about using term to leave an inheritance for his kids (not for protection purpose) which piqued my interest. However it seems good only if the person passes away early, maybe before 30 years of payment.

I've investment in S&P 500 index (via etf) however it is not a regular thing. More like a value averaging investment when there is a dip then i invest more.

Seems like the idea of using a term plan for legacy planning don't really work.

 

[thekang]

Currently I've term policies but those are to cover my 3 mortgage loans. Recently a friend mentioned about using term to leave an inheritance for his kids (not for protection purpose) which piqued my interest. However it seems good only if the person passes away early, maybe before 30 years of payment.

I've investment in S&P 500 index (via etf) however it is not a regular thing. More like a value averaging investment when there is a dip then i invest more.

Seems like the idea of using a term plan for legacy planning don't really work.

You sound like you are very confused.

1) Term to cover mortgage loan?
You mention your term policies are to cover your 3 mortgage loans(so many!). PruTerm Vantage looks like a fixed sum assured based on what I see online. So for example, you have 500k mortgage loan and you buy a PruTerm Vantage of 500k sum assured. Five years later, say your mortgage loan is paid down to 300k, but your PruTerm Vantage still provides 500k sum assured. You end up with extra coverage of 200k! And this extra coverage will grow bigger over time! Not sure if you are aware of this.

2) Legacy planning?
What is your understanding of "legacy planning"? Based on your posts so far, sounds like you dunno what you want, you just think 1 million inheritance sounds good. If you really really want to leave another 1 million in case you unfortunately pass away in the near future, then go buy term (make sure you shop around for the best price). Rest of your spare money can go into investments. But honestly, is it really necessary to get so much coverage for yourself? You already have 3 properties (not fully paid), 3 term policies, your ETF investments and cash to leave to your children. Any more term coverage just means you are placing a bet that you will die soon.

 

[dkgamer]

Currently I've term policies but those are to cover my 3 mortgage loans. Recently a friend mentioned about using term to leave an inheritance for his kids (not for protection purpose) which piqued my interest. However it seems good only if the person passes away early, maybe before 30 years of payment.

I've investment in S&P 500 index (via etf) however it is not a regular thing. More like a value averaging investment when there is a dip then i invest more.

Seems like the idea of using a term plan for legacy planning don't really work.

legacy planning isn't just buy and forget. you have to work with your lawyers and advisor to draft up wills and inheritance procedures to ensure smooth transfer of assets when you die.

buying the plan whichever path is not the end.

if you want to leave behind 1m if you die tmr, buy insurance. you are leaving aside 210k over 35 years worst case scenario you dont die. if you die on 35th year, you earn 7% interest, pmt=6k, pv=1m, fv=0, t=35, solve for %

if your advisor just sells and never do follow up for "legacy" plans with your lawyer. time to reconsider.

 

[edmund77]

You sound like you are very confused.

1) Term to cover mortgage loan?
You mention your term policies are to cover your 3 mortgage loans(so many!). PruTerm Vantage looks like a fixed sum assured based on what I see online. So for example, you have 500k mortgage loan and you buy a PruTerm Vantage of 500k sum assured. Five years later, say your mortgage loan is paid down to 300k, but your PruTerm Vantage still provides 500k sum assured. You end up with extra coverage of 200k! And this extra coverage will grow bigger over time! Not sure if you are aware of this.

2) Legacy planning?
What is your understanding of "legacy planning"? Based on your posts so far, sounds like you dunno what you want, you just think 1 million inheritance sounds good. If you really really want to leave another 1 million in case you unfortunately pass away in the near future, then go buy term (make sure you shop around for the best price). Rest of your spare money can go into investments. But honestly, is it really necessary to get so much coverage for yourself? You already have 3 properties (not fully paid), 3 term policies, your ETF investments and cash to leave to your children. Any more term coverage just means you are placing a bet that you will die soon.

Not confused bro.
1. Just using them differently. The fact that term policies are not tied to a specific property allows me to use them for other properties in the future rather than to purchase another MRTA. Also my mortgage has been increasing instead of decreasing over the years so getting a reducing term doesn't really suit me.
2. My friend told me I could buy term for inheritance but seems like it is not suitable for me after all.

Thanks for the advice.

Sent from HUAWEI MHA-L29 using GAGT

 

[edmund77]

legacy planning isn't just buy and forget. you have to work with your lawyers and advisor to draft up wills and inheritance procedures to ensure smooth transfer of assets when you die.

buying the plan whichever path is not the end.

if you want to leave behind 1m if you die tmr, buy insurance. you are leaving aside 210k over 35 years worst case scenario you dont die. if you die on 35th year, you earn 7% interest, pmt=6k, pv=1m, fv=0, t=35, solve for %

if your advisor just sells and never do follow up for "legacy" plans with your lawyer. time to reconsider.

Thanks for the advice. My lawyer reviews my will every 2 years.

Sent from HUAWEI MHA-L29 using GAGT

 

[DevilCurseYou]

If you are considering the term policy until 99 years, do not that:
currently, 2% of singapore guys will live more than 100 years
60 years down the road, my guess is that 20-60% of the guys will live more than 100 years.
When that happens, your 99 years terms expire to $0, and you might have to contemplate suiciding in order to get payout for your kids.

 

[dendii]

Dont get this. How did you arrive at the stats?

Longer life expectancy is definitely possible hence we can see that certain areas have also raised the benchmark slowy. Eg. CPF withdrawal age and such.

If you are considering the term policy until 99 years, do not that:
currently, 2% of singapore guys will live more than 100 years
60 years down the road, my guess is that 20-60% of the guys will live more than 100 years.
When that happens, your 99 years terms expire to $0, and you might have to contemplate suiciding in order to get payout for your kids.