Dear Mr . Tan,
I am 25 years old. Should I take a 40 year Decreasing Term or a 20 year policy and renew it at the end of 20 years?
REPLY
You should take a Decreasing Term for 40 years. It should cover the duration of your expected working career.
If you take a Decreasing Term for 20 years and wish to renew it at the end of 20 years, the renewal is subject to your health condition at that time. The premium will be based on your age at that time, and will be much higher.
This arrangement is not suitable, as the sum insured under the Decreasing Term will reduce during each period of 20 years.
some term policy includes guaranteed renewal clause. in these policies, renewal is guaranteed, and not subject to health condition. the insurer doesn't have the right to reject renewal on health condition.
ReplyDeleteif the policy includes this clause, in my opinion it is best to buy the shortest term offered. get one year term if possible. with a short term, we don't have to guess how long we need life insurance up front. we can cancel it later when we no longer need it without incurring a loss.
You are right. Using YRT has an advantage.Although the premium goes up every year but it is very minimal if you are young. You can decide to stop if you no longer need it.It is ideal for young people who need large coverage.This explains why the regular ILPs are ppopular beacuse of this feature.
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