Term VS Wholelife: Is Wholelife Insurance Better For You?

Daniel Lee
Feb 25, 2022
5 min read

Updated: May 23

Whenever it comes to life insurance, the most common question that clients would ask is the question of: “Which is better for me? Term life or whole-life”

In my other article, we’ve looked at the quantitative comparison of whole-life versus term life insurance and also the considerations to have as to whether a term life will be better for you.

In this article, we will look at 3 considerations to have as to whether whole-life insurance will be better for you.

1. You need this coverage for a long duration of time

From a pure cost standpoint, whole life insurance is better for you if you need this coverage for a long duration of time for purposes such as income replacement or legacy planning.

To illustrate, let us take a look at 2 different scenarios and compare the lifetime cost.

The first scenario is if you purchase a term insurance that covers you till the age of 75 years old while the second situation is if you purchase two-term insurance to replicate a whole-life insurance behaviour.

In the first scenario, the total premiums for whole life insurance exceed those for term life insurance by approximately $11,188. This extra $11,188 cost for whole life insurance covers:

$250,000 of lifetime coverage beyond 75 years old as compared to $0 coverage for term life
The ability to break even - and eventually make a return - on your policy from the bonuses issued from the participating funds of the insurer.

In the second scenario, a whole-life insurance plan is significantly more affordable than a term life insurance plan because of the extended duration of annual payments required by term plans, in contrast to the limited payment structure of a whole-life plan.

When comparing the two directly, creating lifetime coverage with a term life plan is not economically viable due to the higher total premiums ($77,632) and the absence of cash value accumulation that a whole-life plan offers.

Overall, if you require long-term coverage, whole life insurance may be more suitable for you than term life insurance.

2. You want to have a lifetime coverage

If you want to be covered for life, whole life insurance will be better for you as the cost of term life insurance would not make sense.

Theoretically speaking, you do not need any life insurance coverage beyond your retirement. The reason for saying this is that you will be receiving an income from your retirement portfolio and even if something were to happen to you, your lifestyle will not be compromised.

So why then would people want to have life insurance coverage beyond their retirement?

There are two reasons for this:

The first is if they want to leave a legacy for the next generation
The second is if they want to create a buffer to pay for unexpected expenses that might pop up when they suffer from a disability or a critical illness.

Unexpected expenses can include costs such as home modifications, dietary changes, caregiver expenses, and potentially alternative treatments that aren't covered by hospitalization insurance.

However, even though life insurance coverage may not be necessary after retirement, maintaining some coverage can be beneficial as it serves as a safety net for unforeseen expenses that were not previously accounted for.

After COVID, the significance of having lifetime coverage has transitioned from being a desire (as mentioned in the previous points) to becoming more of a necessity due to the declining effectiveness of our hospitalization plan.

Since 2020, the hospitalization insurance industry has experienced several rounds of changes, including premium hikes and alterations to benefits (mostly unfavorable). These adjustments are driven by continuous underwriting losses and the impact of escalating medical inflation.

Looking ahead, we can anticipate further negative changes as an aging population will increase cost pressures on our already strained medical system. Thus, having lifetime coverage would serve as a safeguard against diminishing benefits from our hospitalization coverage.

3. You do not know how or have the time to invest

If you need to be insured for a long duration of time AND you do not have the know-how or time to invest, you will be better off with whole life insurance.

The reason for saying so is that for term life insurance to be quantitatively better than whole life insurance in the area of payout receivable and the surrender value, you need to at least be able to earn a yearly return of more than 4%

While in theory, earning 4, 6, 8 or even 10% a year seems very doable.

In practice, it is not as easy as it seems to be large because of the lack of discipline and emotional control that may impede your performance.

Also, for you to earn a return of 4 to 6% a year, you will need to take on additional risk that, chances are, is higher than the risk of a whole-life plan.

That said from a risk-adjusted standpoint, I believe that a whole-life insurance plan would make more sense especially if you do not have the know-how or time to invest.

Summary

So, there you have it, these are the three considerations to have as to whether or not a whole-life plan is better for you.

To recap, the first is if you need to be covered for a long duration of time, the second is if you want to be covered for life and the third is if you do not know how or do not have the time to invest.

In these situations, a whole-life plan might be better for you as compared to a term-life plan.

All of these can also be found in my eBook: “The Price Of Financial Freedom” which will provide you with a comprehensive guide to help you achieve financial freedom and live life on your terms in the shortest amount of time.

You can download a copy of it for free on my website:

If you do not know how to get started with your financial planning or if you do not have the time to manage your finances or do the necessary market research, you can consider engaging an Independent Financial Advisor who can help you make sense of the market, accelerate your progress and achieve financial freedom by 5 to 10 years earlier!

To find out more information about how you can benefit from my financial and insurance planning services, you can check out what I do on my website here: