Term vs Whole Life

[wealth_farmer]

I am comparing Term vs Whole Life plans to cover Death, TPD & Critical Illness.

From various illustrations & quotes received, I compiled the following :

A) Term (TPD, Death, CI) - Sum assured $150k for next 22 years. Nothing thereafter

annual premium = $1940 (GE term)
payment terms = 22 years
total premium = $42680

PV of Cost of Term Insurance = $38,500 (@1.5% discount rate) or $36,200 (@2%)

B) Whole Life (TPD, Death, CI) - $175k for next 22 years. Thereafter, 50k + non-guaranteed bonus

annual premium = $10615 (NTUC Vivo350)
payment terms = 5 years
total premium = $53,075

PV of Premium = $51,500 (@1.5% discount rate) or $51,000 (@2%)

Guaranteed Surrender Value at 22 years = $37,250
PV of Guaranteed Surrender Value at 22 years = $26,800 (@1.5%) or $24,100k (@2%)

PV of Cost of WL = $24,700 or $26,900 (ie PV of Premium less PV of Guaranteed Surrender Value)

From above, it seems the WL is clearly the better plan, in terms of both coverage & cost.

Or am I missing something ? Appreciate any comments.

Hmmm your term life sum assured amount seems quite low for the amount of premium you're paying? Seems like an expensive term plan to me.

 

[oceanicmanta]

It's the cashflow thing. If you do Term right now, you could have some $ which you could invest for potentially higher returns.

That said, I believe Term and Whole Life both has its place in one's "insurance portfolio". I have both term and whole life plans.

ok ... so i need to include the potential returns from BTIR

Hmmm your term life sum assured amount seems quite low for the amount of premium you're paying? Seems like an expensive term plan to me.

... that's one of the lowest cost for my age ... though have not looked at Aviva Group Life yet.

 

[havetheveryfun]

I am comparing Term vs Whole Life plans to cover Death, TPD & Critical Illness.

From various illustrations & quotes received, I compiled the following :

A) Term (TPD, Death, CI) - Sum assured $150k for next 22 years. Nothing thereafter

annual premium = $1940 (GE term)
payment terms = 22 years
total premium = $42680

PV of Cost of Term Insurance = $38,500 (@1.5% discount rate) or $36,200 (@2%)

how old are u ? total premium of 42.6k seems quite ex for just 150k coverage n 22 years.. unless u are like 40 + years old

my calculations last time was around 30k for 30 years for 300k coverage for a non smoker male 30 years old (around 1k or less premiums annually)

 

[JuniorLion]

ok ... so i need to include the potential returns from BTIR



... that's one of the lowest cost for my age ... though have not looked at Aviva Group Life yet.

Group Term Life is one of the cheapest.

 

[vddgnd]

Group Term Life is one of the cheapest.

Group term insurances are easily subject to change if compare to personal term plan. It may subject to discontinue. So, it is still important to have personal term or WL plan as a base coverage, can add group term as extra top up.

 

[wealth_farmer]

Group term insurances are easily subject to change if compare to personal term plan. It may subject to discontinue. So, it is still important to have personal term or WL plan as a base coverage, can add group term as extra top up.

It would be quite shocking for me if what you say is true. Could you share what group term insurance that you've seen that have seen substantial change and/or discontinuation?

I want to say that in that situation, existing members of that group policy would have been given comparable, or perhaps just slightly less favourable, terms under a new policy. Surely MAS would have some rules in that situation protecting consumers?

Just to add, it's possible for ANY insurer to go into financial difficulty and tweak its existing policies, or even go out of business entirely. So having a personal plan is not rock solid either.

 

[vddgnd]

I am comparing Term vs Whole Life plans to cover Death, TPD & Critical Illness.

From various illustrations & quotes received, I compiled the following :

A) Term (TPD, Death, CI) - Sum assured $150k for next 22 years. Nothing thereafter

annual premium = $1940 (GE term)
payment terms = 22 years
total premium = $42680

PV of Cost of Term Insurance = $38,500 (@1.5% discount rate) or $36,200 (@2%)

B) Whole Life (TPD, Death, CI) - $175k for next 22 years. Thereafter, 50k + non-guaranteed bonus

annual premium = $10615 (NTUC Vivo350)
payment terms = 5 years
total premium = $53,075

PV of Premium = $51,500 (@1.5% discount rate) or $51,000 (@2%)

Guaranteed Surrender Value at 22 years = $37,250
PV of Guaranteed Surrender Value at 22 years = $26,800 (@1.5%) or $24,100k (@2%)

PV of Cost of WL = $24,700 or $26,900 (ie PV of Premium less PV of Guaranteed Surrender Value)

From above, it seems the WL is clearly the better plan, in terms of both coverage & cost.

Or am I missing something ? Appreciate any comments.

The GE term CI is it stand alone or accelerate pay out type?

We don't compare stand alone and accelerate type together because the premium naturally is different class.

Accelerate type CI plan, after claim the policy will be terminated. Stand alone type after claim CI, the policy still remain can claim for death, TPD.

If want a longer protection period, it is more worth it to just buy WL plan. Can top up coverage with short term plan. But nowadays, many WL plan come with multiplier. It is WL+term.

I have a 100k TPD death CI 30 years term plan with annual premium slightly less than 500. Your GE term is it payment term 22 year, but protection term longer? Seem more expensive.

 

[Mecisteus]

I am comparing Term vs Whole Life plans to cover Death, TPD & Critical Illness.

From various illustrations & quotes received, I compiled the following :

A) Term (TPD, Death, CI) - Sum assured $150k for next 22 years. Nothing thereafter

annual premium = $1940 (GE term)
payment terms = 22 years
total premium = $42680

PV of Cost of Term Insurance = $38,500 (@1.5% discount rate) or $36,200 (@2%)

B) Whole Life (TPD, Death, CI) - $175k for next 22 years. Thereafter, 50k + non-guaranteed bonus

annual premium = $10615 (NTUC Vivo350)
payment terms = 5 years
total premium = $53,075

PV of Premium = $51,500 (@1.5% discount rate) or $51,000 (@2%)

Guaranteed Surrender Value at 22 years = $37,250
PV of Guaranteed Surrender Value at 22 years = $26,800 (@1.5%) or $24,100k (@2%)

PV of Cost of WL = $24,700 or $26,900 (ie PV of Premium less PV of Guaranteed Surrender Value)

From above, it seems the WL is clearly the better plan, in terms of both coverage & cost.

Or am I missing something ? Appreciate any comments.

This is a weird way of calculation. Nobody does it this way.

1 flaw in your calculation is you did not include the excess money that can be invested for not buying WL.

 

[vddgnd]

It would be quite shocking for me if what you say is true. Could you share what group term insurance that you've seen that have seen substantial change and/or discontinuation?

I want to say that in that situation, existing members of that group policy would have been given comparable, or perhaps just slightly less favourable, terms under a new policy. Surely MAS would have some rules in that situation protecting consumers?

Just to add, it's possible for ANY insurer to go into financial difficulty and tweak its existing policies, or even go out of business entirely. So having a personal plan is not rock solid either.

For example company group insurance. Anyway there is an experience financial advisor commented when I want to depend heavily on group term insurance in my insurance portfolio. My company group term insurance really change frequently in recent year.

 

[wealth_farmer]

For example company group insurance. Anyway there is an experience financial advisor commented when I want to depend heavily on group term insurance in my insurance portfolio. My company group term insurance really change frequently in recent year.

Ok, thanks for sharing, I see where you are coming from now. I like to think that SAF has enough of a critical mass to maintain the terms of the policy as compared to cost-conscious corporates.

With all due respect, I feel that your financial advisor has a conflict of interest when criticising the group term insurance plan, especially if it's the SAF GTL. To be fair, I had the SAF plan when I was also on my company's plan but my thinking was that my company's plan coverage would end when I leave the company so it's prudent to have my own plan.

Back to the conflict of interest of your financial advisor, products such as Direct Purchase insurance and the SAF Group Term Life insurance doesn't bring them any commission so they have a vested interest to speak out against those when they can. You must see things from their point of view to really understand their motivation.

 

[JuniorLion]

Ok, thanks for sharing, I see where you are coming from now. I like to think that SAF has enough of a critical mass to maintain the terms of the policy as compared to cost-conscious corporates.

With all due respect, I feel that your financial advisor has a conflict of interest when criticising the group term insurance plan, especially if it's the SAF GTL. To be fair, I had the SAF plan when I was also on my company's plan but my thinking was that my company's plan coverage would end when I leave the company so it's prudent to have my own plan.

Back to the conflict of interest of your financial advisor, products such as Direct Purchase insurance and the SAF Group Term Life insurance doesn't bring them any commission so they have a vested interest to speak out against those when they can. You must see things from their point of view to really understand their motivation.

Yes, he is right about company's group insurance changing.

I also believe that the 2 big Group Insurance out there, namely SAF GTL and POGIS GTL are more or less stable. When there's a change, there will be comparable terms to other insurers (with no lapse of coverage).

 

[oceanicmanta]

This is a weird way of calculation. Nobody does it this way.

1 flaw in your calculation is you did not include the excess money that can be invested for not buying WL.

... just a crude way of rationalising and quantifying the cost for comparison

 

[oceanicmanta]

Group Term Life is one of the cheapest.

for SAF Grp Term Life, is it possible to add on Critical Illness cover ?

I read somewhere CI under SAF GTL can becomes more expensive than other with age ?

 

[JuniorLion]

for SAF Grp Term Life, is it possible to add on Critical Illness cover ?

I read somewhere CI under SAF GTL can becomes more expensive than other with age ?

Yes you can add CI and early CI. And yes, the price will increase with age.

Will it be more expensive than other insurer's Term + CI? I do not know. You have to compare it yourself.

 

[wealth_farmer]

for SAF Grp Term Life, is it possible to add on Critical Illness cover ?

I read somewhere CI under SAF GTL can becomes more expensive than other with age ?

Yes, you can. And yes, it's true, for me at least.

What I did when I bought my SAF GTL was compare it to my existing Aviva MyProtector - Level Plus Term policy. What I found was that yes SAF GTL is more expensive as you get closer to 65, but these extra costs are still less than the rather substantial savings you get from the cheaper premium when you're younger. As you're older than me, the breakeven cost-benefit analysis would be different, but the SAF GTL pricing for all the riders can be seen from the website so you should be able to make an informed decision. I would say SAF GTL is cheap only for the term protection part of the plan, but the riders are not particularly cheap. I guess Aviva is trying to use the SAF GTL term protection premiums as loss leaders, and make it up in the optional riders.

 

[oceanicmanta]

@wealth farmer - the SAF CI rider is referring to Living Care Plan ?

Had a look at website ... for both SAF Term plan and CI rider, the cost up to age 65 is very reasonable.

Beyond 65, however, the cost increases significantly. The PV of total cost of coverage up to 70yo is comparable to GE Term for my case.

As premiums are not level based on age or entry but increases with age, future premiums may rise, simply due to inflation ??
Aviva rep at recent ICT also said their GTL is on contract basis from SAF.
So there is also a possibility it may not get renewed ??
But Aviva rep said so far premiums have come down, rather than go up and the GTL has been ongoing ...

 

[wealth_farmer]

@wealth farmer - the SAF CI rider is referring to Living Care Plan ?

Had a look at website ... for both SAF Term plan and CI rider, the cost up to age 65 is very reasonable.

Beyond 65, however, the cost increases significantly. The PV of total cost of coverage up to 70yo is comparable to GE Term for my case.

As premiums are not level based on age or entry but increases with age, future premiums may rise, simply due to inflation ??
Aviva rep at recent ICT also said their GTL is on contract basis from SAF.
So there is also a possibility it may not get renewed ??
But Aviva rep said so far premiums have come down, rather than go up and the GTL has been ongoing ...

Yes that is the one. I believe I also got the disability coverage from them as well because I wanted to replicate as best as I can with my existing Aviva MyProtector.

So if you still want coverage beyond 65, you'll need to ask yourself if you really need it. Unless you had children late and therefore still need to support them, your risk after 65 (and presumably in retirement) is no longer mortality (i.e. dying), but outliving your resources and also illness. So, I'm not too bothered (personally) by the escalating cost of coverage for this policy as I do not intend to extend beyond 65; I may even reduce my sum assured as I age because I'm working very hard now to save and invest so that I can increasingly self-insure.

Usually premiums increase not only due to inflation. There are other important factors such as the accuracy of their underwriting, meaning are people claiming more under this policy than their actuarial tables predict. This could result in an underwriting loss for them, and they may then need to raise premiums to stay viable.

This point actually works in favour for the SAF GTL in my opinion. This is because SAF have a new batch of 18-year old NSFs joining every year, all in reasonably good health. By having this deal with SAF, Aviva is actually able to infuse their insured pool with healthy applicants and this is a big advantage for their actuaries because usually the people who insure are those who agar-agar know something is going to happen to them. This is not usually the case with healthy young 18-year olds. Plus they are then usually able to lock them in for life as they continue their coverage after they ORD. Even for the older, non-NSF insureds, the fact that we are required to go for IPPT annually would also imply that we are somewhat healthier in our daily lives, which is again a risk-reducer for the insurance companies. Therefore even if Aviva doesn't want to continue this deal for SAF, I think other insurers would jump in to cover.

 

[PeanutButtor]

Yes that is the one. I believe I also got the disability coverage from them as well because I wanted to replicate as best as I can with my existing Aviva MyProtector.

So if you still want coverage beyond 65, you'll need to ask yourself if you really need it. Unless you had children late and therefore still need to support them, your risk after 65 (and presumably in retirement) is no longer mortality (i.e. dying), but outliving your resources and also illness. So, I'm not too bothered (personally) by the escalating cost of coverage for this policy as I do not intend to extend beyond 65; I may even reduce my sum assured as I age because I'm working very hard now to save and invest so that I can increasingly self-insure.

Usually premiums increase not only due to inflation. There are other important factors such as the accuracy of their underwriting, meaning are people claiming more under this policy than their actuarial tables predict. This could result in an underwriting loss for them, and they may then need to raise premiums to stay viable.

This point actually works in favour for the SAF GTL in my opinion. This is because SAF have a new batch of 18-year old NSFs joining every year, all in reasonably good health. By having this deal with SAF, Aviva is actually able to infuse their insured pool with healthy applicants and this is a big advantage for their actuaries because usually the people who insure are those who agar-agar know something is going to happen to them. This is not usually the case with healthy young 18-year olds. Plus they are then usually able to lock them in for life as they continue their coverage after they ORD. Even for the older, non-NSF insureds, the fact that we are required to go for IPPT annually would also imply that we are somewhat healthier in our daily lives, which is again a risk-reducer for the insurance companies. Therefore even if Aviva doesn't want to continue this deal for SAF, I think other insurers would jump in to cover.

Was looking around for info. By far this is the best knowledge and honest information shared around here. It make sense and worked for me.

 

[Zenest]

SAF Group Term limitation is that it expires age 70, the age where CI is most likely to occur after.

If one plans to have CI cover to see them though old age, it may make sense to have an individual plan that covers whole of life (whether term or participating plan) to complement with SAF Term Life & TPD.