Dear Mr. Tan
I am considering terminating the Living Policy for myself and my husband and buying term insurance instead.
About the effect of deduction, wow, I really didn't know about that until you mentioned it in your blog. And I read again our policies, they really take away such big amount from us! Is this the standard practise? Do other insurance companies do this also?
It is true that the Living policy takes away a lot of the premium. But the coverage is wider than a Term policy (unless you buy a Term policy that covers the critical illness as well).
My advice on buying Term insurance applies to a new policy (and not to the termination of an existing policy). Usually, after a policy is taken, I advise people to continue the policy as they have already incurred the high initial expenses. I have two Living policies on my own life as well, which I am continuing.
If you wish to terminate an existing policy, you should look at the yield over the next 5 years. This is explained in this FAQ:
The effect of deduction for similar policies sold by other insurance companies is likely to be higher.
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