Whole life insurance plans provide you with lifelong protection. Your premiums at the beginning are higher to help cover the costs of providing you that protection later in life when term premiums get costly. The company averages out the cost of giving you life insurance protection for your entire life, then overcharges you when you’re young and undercharges you when you’re older.

Whole life policies build cash value which you can take a loan by pledging with your policy from the company or redeem by cashing in the policy. However do note that the outstanding loan amount will be deducted with interest from the payout should there be a claim.

Advantages of whole life generally include the tax-free interest you earn on your cash value. The interest charged on the loans on the cash value of the whole life policies are generally less than that charged for similar loans available elsewhere. However I wouldn’t encourage customers to go into this option as it will compromise on their sum assured in the end.

Regular premium payments must be made on whole life policy or the policy may lapse. Outstanding loans when you die will be subtracted from the amount paid to your beneficiaries. Cash value grows relatively slowly during the early years of the policy. This means that if you cash in a whole life policy after only five years, you get relatively little back for the relatively higher premiums you’ve paid.

Whole life is best if you have no self-discipline or tolerance for risk when you save or invest. Another word it is suitable for low risk/conservative consumer.

It is best to be bought during young because the premiums that you paid will ‘fetch’ a higher sum assured and most importantly you are guaranteed insurable if you are healthy at the point of time.

Related posts:

  1. Term Insurance
  2. Investment-Link Policy
  3. Policy holders sue AIA only to be sued back
  4. Why Should I Buy Insurance?
  5. Singaporean Are Underinsured!