When buying personal life insurance, you’d be introduced to Term life insurance, Whole life insurance, Endowment/savings plans, as well as Investment-linked policies.
Each product type has its purpose, advantages and disadvantages.
So what is Whole life insurance?
Whole life insurance provides coverage for the life of the insured. In addition to paying a death benefit, whole life insurance also contains a savings component in which cash value may accumulate. These policies are also known as “permanent” or “traditional” life insurance.Whole Life Insurance, Investopedia
Key benefits of Whole life insurance:
- Pay premium for limited term, lifetime coverage (till age 99)
- Do note that in Singapore, for most (if not all) whole life insurance policies, Total & Permanent Disability (TPD) coverage terminates at age 65 or 70 of the life assured.
- Whole life insurance policies generally cost more than Term life insurance policies as part of the premium is invested to build cash value.
- Policy loan is allowed.
- Do note that it is to be repaid with interest.
- Early termination would incur early surrender charges, which may result in losses.
- If you have to cut down on premiums, you may consider converting to a Paid-up term policy. (I’ll touch on this in a different post.)
[Read more at: Understanding Whole Life Insurance, A Beginner’s Guide To Participating Whole Life Insurance VS Investment-Linked Policies (ILPs). I’ll be writing on ILP in a subsequent post.]
[Important disclaimer: the objective of this post is to provide a brief explanation of Whole life insurance for ease of understanding. Further details should be discussed with your financial consultant/planner, especially with regards to your own policy and your financial needs analysis.]