13-12-2010, 11:49 PM
Ok, just met my financial planner and had a detailed 3-hour+ discussion with her. Basically, I am planning the following after reading and re-reading this thread.
1) Surrendering 2 of my whole life policies (out of 3) and replacing them with 1 reducing term policy (till age 65) with almost double the coverage. The other is a term policy with a flat rate of $100,000 coverage for Critical Illness.
2) Retaining a whole life policy which covers death, TPD and CI for about $60,000 but is payable till age 99. Question: Should I also surrender this policy and convert it to a higher term coverage for CI instead?
3) Terminating a 10-year renewable term policy which covers me for about $280,000 as premiums will rise a lot for every 10-year age bracket. I have replaced this with the prevoiusly mentioned reducing term policy till age 65 (when I should have enough retirement savings and my daughter should have graduated and started work).
4) Retaining an endowment policy with NTUC Income purchased back in 1997. So far the projected returns for this 30-year policy are 4.14% per annum, and the policy will mature when my daughter is about 18, so this can form part of her education expenses. The current surrender value already exceeds the total amount put in so far, so there is a "paper profit" on this policy.
5) Purchased a disability income insurance policy which will pay out S$3,000 per month till age 65. If activated, no premiums will be required and if I manage to resume working again, the policy will still be active. There is also a clause for a 3% escalating benefit as a protection against inflation. Waiting period is 3 months from the time of disability to payout.
Comments are welcome, and my personal view is that I should also surrender No. 2. Haha.
As for my child's whole life policy, I compare the two views provided below, one from d.o.g. and the other from my financial planner (who is of course non-objective):-
d.o.g.'s view , Do NOT buy whole life policy on a child. Instead, purchase a term policy to cover death, TPD and CI till she is of income-generating age, then she can purchase her own term coverage and disability income insurance. In other words, I take this to mean that purchase an 18-year term policy to cover death, TPD and CI, then let her switch when she is 18 when the policy expires.
Financial Planner's view , My daughter's current policy is a whole life one, and covers death, TPD and CI for S$250,000. It is payable for 20 years after which no more premiums are required; and will cover her FOR LIFE. Her logic is that the CI coverage is very high for a child so young, and at age 20 she cannot buy a cheap term policy with such a high CI coverage (which is true since I asked her to check this for myself , a term policy covering $200,000 CI is fairly expensive). Also, as the policy covers her till death (even her natural death), it is an asset which can be passed on to her dependents and the next generation. So assuming she dies at age 80, there will be 80 years of compounding which can be very significant.
So now the question is open to the floor - are there any comments on both views, and did I miss out anything? While d.o.g.'s logic is impeccable in that you save quite a sum buying term when a child is young, then letting her buy her own term policy and disability income when is of age, the fact is that there is no compounding and no asset at the end of her life to pass down should she not succumb to death, TPD or CI at all.
Thanks in advance for all your views!
1) Surrendering 2 of my whole life policies (out of 3) and replacing them with 1 reducing term policy (till age 65) with almost double the coverage. The other is a term policy with a flat rate of $100,000 coverage for Critical Illness.
2) Retaining a whole life policy which covers death, TPD and CI for about $60,000 but is payable till age 99. Question: Should I also surrender this policy and convert it to a higher term coverage for CI instead?
3) Terminating a 10-year renewable term policy which covers me for about $280,000 as premiums will rise a lot for every 10-year age bracket. I have replaced this with the prevoiusly mentioned reducing term policy till age 65 (when I should have enough retirement savings and my daughter should have graduated and started work).
4) Retaining an endowment policy with NTUC Income purchased back in 1997. So far the projected returns for this 30-year policy are 4.14% per annum, and the policy will mature when my daughter is about 18, so this can form part of her education expenses. The current surrender value already exceeds the total amount put in so far, so there is a "paper profit" on this policy.
5) Purchased a disability income insurance policy which will pay out S$3,000 per month till age 65. If activated, no premiums will be required and if I manage to resume working again, the policy will still be active. There is also a clause for a 3% escalating benefit as a protection against inflation. Waiting period is 3 months from the time of disability to payout.
Comments are welcome, and my personal view is that I should also surrender No. 2. Haha.
As for my child's whole life policy, I compare the two views provided below, one from d.o.g. and the other from my financial planner (who is of course non-objective):-
d.o.g.'s view , Do NOT buy whole life policy on a child. Instead, purchase a term policy to cover death, TPD and CI till she is of income-generating age, then she can purchase her own term coverage and disability income insurance. In other words, I take this to mean that purchase an 18-year term policy to cover death, TPD and CI, then let her switch when she is 18 when the policy expires.
Financial Planner's view , My daughter's current policy is a whole life one, and covers death, TPD and CI for S$250,000. It is payable for 20 years after which no more premiums are required; and will cover her FOR LIFE. Her logic is that the CI coverage is very high for a child so young, and at age 20 she cannot buy a cheap term policy with such a high CI coverage (which is true since I asked her to check this for myself , a term policy covering $200,000 CI is fairly expensive). Also, as the policy covers her till death (even her natural death), it is an asset which can be passed on to her dependents and the next generation. So assuming she dies at age 80, there will be 80 years of compounding which can be very significant.
So now the question is open to the floor - are there any comments on both views, and did I miss out anything? While d.o.g.'s logic is impeccable in that you save quite a sum buying term when a child is young, then letting her buy her own term policy and disability income when is of age, the fact is that there is no compounding and no asset at the end of her life to pass down should she not succumb to death, TPD or CI at all.
Thanks in advance for all your views!
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