Keep your living policy

Dear Mr Tan

I really enjoy reading your blog. You have certainly opened up my mind especially with respect to insurance.

I have a NTUC Living policy for a sum assured of $35K. I have been paying it for 13 yrs now. The bonus is about $14K. The surrender value is $9K now.

Does it means that if I die now or come down with critical illness, I will only get the sum assured + bonues (ie $35K + $14K = $49K). I'm paying a total annual premium of $723.

On the other hand, if I buy a $50K term now, I only pay about $120 per yr. So for the same payout, I will be paying much less ($120 vs $723). It just seems too good to be true to terminate my current living policy, pay less premium and yet get the same coverage.

Thank you for your time Mr Tan, it really brings a new perspective on financial planning.

REPLY:

This is correct. You are covered for $49,000 in the event of a claim.

I suggest that you keep your living policy and take the term insurance as well, if you can afford both premuim. The living policy covers 30 dread disease and have a cash value at any time that you terminate it. The cash value increases each year.

The term policy is cheaper, but it does not have any cash value. It covers you for a specific term, i.e. 10 or 20 years. After the term, the cover ceases.