By MoneyBees
Compare buying term and investing the difference with a whole life policy on your own quotes: what the invested difference could grow to and the return it needs to match the policy's cash value.
Term is usually far cheaper for the same cover because it has no cash value. MoneySense describes term as the most affordable option and whole life as costing more, since part of the premium builds cash value.
You buy term cover and invest the premium you save compared with whole life, every year. The comparison is the invested pot against the whole life policy's cash value at the same age.
It depends on your quotes. This calculator finds the yearly return at which the invested difference equals the cash value you enter from the whole life illustration. A return above that favours term and invest, below it favours the policy.
In the policy illustration the insurer or adviser gives you. For a participating policy it shows cash values under different investment return scenarios; the non-guaranteed bonuses may turn out lower or higher.
You must invest the difference every year and leave it alone, the return is not guaranteed, and term cover ends at the end of the term. Renewal premiums can rise sharply with age.
It costs more than term for the same cover, part of the cash value may not be guaranteed, and MoneySense notes that ending the policy early causes you to lose money.
compareFIRST, a comparison site whose partners include the Life Insurance Association, MoneySense and CASE, lists premiums and benefits for term and whole life policies from many insurers. Enter the figures you find here.
MoneySense suggests deciding first whether you need cover for a fixed period, such as until your youngest child is self-reliant, or for life, and what premium you can afford. This page shows the money side only.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).