I met two new friends over a cup of coffee. They asked for my advice on how to obtain high coverage at a low cost.
I said:
* if a person in the late 20s buy a whole life policy for $200,000, he has to pay a monthly premium of $300
* if he buys a 20 year deceasing term assurance, the premium is only $20 a month.
They were surprised that the secnond plan is so affordable.
I explained that they can invest the difference of $280 into a unit trust or mutual fund, and get a good return over the next 20 years, and have a flexible savings plan.
"Why did not insurance agent not offer this option?"
The reason: the insurance agent earns much more by selling a whole life policy, instead of a decreasing term policy.
I feel that you should not generalise it like that. Recommendation by insurance agents depends very much on what took place during the conversation with the client. I am an agent myself, and I do give clients options between whole life and term, and explaining the pros and cons of both. Some clients eventually opt for term, some opt for whole life. They all have their own reasons for their choice.
ReplyDeleteMr Tan, One size doesn't fit all. If you do a tabulation and calculate the premiums that you have incurred using term insurance to cover the 30 critical illnesses up to Age99, you will find that buying term insurance is MORE expensive than limited payment whole life insurance.
ReplyDeleteIt will always be better for the customer to buy term insurance and invest the difference.
ReplyDeleteCritical illness can be covered by a medical insurance plan.