You will be able to name the situations where cover that lasts for life is a reasonable choice.
After lesson 3.4 it would be easy to conclude that whole life is always the wrong choice. That isn't the conclusion. Buy term and invest the rest works when the need for cover ends at a known date and you will invest the difference. When the need never ends, or when you know you won't invest, the comparison changes. This lesson names those situations, so you can tell a real reason for permanent cover from a sales line dressed up as one.
Mei's cousin Wei Jie has a six-year-old son, Ethan, with an intellectual disability. Ethan is likely to need support his whole life, including after Wei Jie and his wife are gone. For Jun Hao, cover can end when Elise is 22. For Wei Jie there is no such date.
Term cover to 65 doesn't fit that need. If Wei Jie dies at 70, Ethan still needs support, and term would have ended. Renewing term at 65, if possible at all, would be very expensive. Cover that lasts for life is designed for this case.
The amount comes from the same arithmetic as lesson 2.1, Needs-based cover beats a multiple of salary. Wei Jie estimates, as an example, that Ethan would need S$1,500 a month in support beyond what government schemes and family would give, for perhaps 25 years after both parents have died. That's S$1,500 times 12 times 25, or S$450,000, before subtracting what the parents expect to leave. If they expect to leave a paid-up flat and S$200,000 of savings set aside for him, the permanent cover the need justifies is closer to S$250,000. Families in this situation usually also look at a trust and a will to make sure the money is used for the child, which Retirement & Estate covers.
That is a real lifelong need. Most families don't have one.
Some people want cash to arrive on their death whenever it happens. A business owner may want money so the family isn't forced to sell the business quickly. A parent may plan to leave the flat to one child and want an equal sum for the other. A policy that pays at any age can provide that cash.
Singapore has no estate duty, so the tax reason common in some other countries doesn't apply here. The case here is about having cash in the right hands quickly, and about fairness between heirs. Even then, ask whether savings and investments, or CPF savings passing by nomination, would do the same job.
Some people know they won't invest the difference. They've tried a regular savings plan and stopped it. For them, a premium that must be paid each year, or the policy suffers, is the only saving that sticks. Lesson 3.4 showed that if Jun Hao invested only half the difference, whole life's guaranteed value came out ahead.
That's a legitimate reason, but be clear-eyed about what it costs. You're paying distribution costs, giving up access to the money in the early years, and accepting lower guaranteed returns in exchange for a discipline you could build in other ways, such as a standing instruction that invests on payday. Lesson 2.3 of The Singapore personal finance system, end to end, Automate payday so saving happens first, shows how. Try that first, for a year, before paying for discipline through a policy.
Here are lines you may hear in a sales meeting, with the question to ask about each.
"You'll be covered for life." Ask who would need the money if you died at 80, and why. "It's a savings plan with protection." Then compare it as a savings plan, using lesson 3.2's surrender table. "Lock in while you're young." Locking in a premium only helps if you need the cover later; lesson 1.3 covered the real case for buying young. "You can leave it to your children." Ask whether they would need it, or whether this is a wish you'd fund some other way. "It pays for your retirement." Then compare the surrender value at retirement with what the same money would build elsewhere.
None of these lines is false. Each describes something the policy does. The question is whether you need that thing, and whether this is the cheapest way to get it.
Jun Hao ran through the list. He has no dependant who will need support for life. He has no business, and the flat will pass to Mei. He has kept a regular investment going for four years, through one bad year. His need for cover ends at 58.
He already holds S$100,000 of whole life cover from age 26, which pays out whenever he dies. That's more permanent cover than any need he can name. He decided the new S$200,000 whole life plan didn't meet a need, and that term cover was the better fit for the gap from module 2. He kept the old policy, and lesson 7.2 explains why replacing it would have cost him.
Your answer may differ. Wei Jie's did. What matters is that the answer comes from a need you can name and size, rather than from the policy's features.
Write whether any of your needs last for life and, if so, what amount of permanent cover they would justify.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).