If you are a male at 30 years and have a limited budget of $600 a year for life insurance and you wish to provide for your family in the event of premature death during the next 30 years, you have the following options:
a) Level term, covers $182,000
b) Decreasing term, covers $486,000 reducing gradually over 30 year
c) Family income of $1,685 payable monthly for remainder of 30 years (initial cover is $606,000)
Option (a) provides the same amount in the event of premature death. Option (b) and (c) provides a higher amount in the event of death during the earlier years, and a lower amount in the later years.
You also have the option to buy a whole life policy and get a sum assured of $30,000. This covers you for the whole of life and accumulates a cash value (i.e. some savings).
Which option do you prefer?
Hi Mr Tan,
ReplyDeleteI prefer option (b).
My family, non-financially savvy, will be better off getting monthly income instead of a lump sum.
Also, a higher monthly income (option b) is better than getting a fixed $1,685 during the initial years.
This is because a $1,685 doesn't count alot in the latter years after adjusting for inflation.
But insurance agents prefer to sell $30K whole life . There is more commission for $30k than a $300k term
ReplyDeleteBut the $300K is what the customer needs. But who cares!! I am in this business to make money. My business isn't minding someone else's business.