do I need death coverage?
I would say no unless:
1. you have dependents (elderly parents, young children & youโre one of the breadwinners of the family)
2. you have an outstanding mortgage loan/debt
Death coverage is meant to be left behind for your loved ones in the event of your demise. That is why in order of importance, death coverage is usually the last out of the 4 pillars.
If you fall within either of the 2 reasons, then death coverage is something you should start prioritising. There are many death coverage plans out there & as the insurance industry evolve, ILPs are no longer the monster people think they are. Now, donโt get me wrong, Iโm not saying ILPs are better and you should get ILPs. At the end of the day, there will always be pros & cons when it comes to these plans. So, what are the pros and cons?
1. Traditional whole life plans
โ Guaranteed coverage until end of life
โ Limited payment term (15-25 years)
โ Accumulation of cash value is on the lower side (usually 3.25% thereabouts)
โ No flexibility. To get access to cash value, plan must be surrendered.
โ Usually expensive
2. Term
โ Suitable for short term liabilities, such as mortgage loans
โ Depending on needs, payment term could be long
โ No cash value
โ No coverage after term ends
3. ILPs
โ Single premium to settle coverage until demise (pay once)
โ 100% of premiums used to purchase units
โ High leverage. Value in terms of premium vs sum assured
โ Access to actively managed funds to generate returns more than 8% (not guaranteed)
โ Flexibility to withdraw returns from investments to fund needs along the way
โ Risky. Investment returns not guaranteed
โ Higher fees & charges
โ In the event when fund is not performing, may need to top up to keep the plan in force
There are many policies in the market out there! When looking at policies, ask questions to have clarity & to make sure what youโre buying suits your needs as much as possible.
As usual, feel free to ask me any questions you might have and Iโll be glad to answer them for you!
In addition to the main points discussed, it's important to think about your personal financial goals and circumstances when deciding on death coverage. For example, if you have young children, you want to ensure their education and living costs are covered even if you're not around. Beyond debts and dependents, some people consider death coverage as part of their long-term estate planning to leave a smoother inheritance. For those exploring coverage options, understanding the investment-linked policies (ILPs) further can be helpful. ILPs might appeal if you prefer a blend of insurance and investment with flexibility, but you should be comfortable with some risk and potential additional costs if investments underperform. On the other hand, traditional whole life plans provide guaranteed lifelong protection with stable premiums, which might suit those prioritizing security over growth. When shopping for policies, also take note of riders or additional benefits that can enhance your coverage, such as critical illness protection or accidental death benefits, which could offer extra peace of mind. A tip from my own experience: evaluate your existing cash reserves and emergency funds before deciding on the total death coverage amount. Sometimes having a sizeable emergency fund may reduce the immediate need for high coverage. Lastly, regularly review your death coverage as your life stages changeโmarriage, kids, paying off your home, or career shiftsโto ensure your coverage aligns with your current needs. Don't hesitate to ask your insurance advisor plenty of questions to tailor the best plan for you.
