Insurance: Whole-Life Policy or Investment-Linked Policy (Part 1)

I believe many people are confusing in the sense that they have no idea on how to choose among different insurance policies.  Should it be terms policy, whole-life policy or investment-linked policy?

In my previous posting, I explained that term is suggested based on its feature of affordable premium with great protection.  Right now, for the first part of this title, I would like to share with you about the differences between whole-life and investment-linked policy.

Features of Whole Life Policy include:

1. whole life protection subject to cash value reserved
2. fixed premium paid and have to keep paying up to age 99 (Rule of Bank Negara)
3. change of premium means Sum Assured must be revised as well – regardless of cash value
4. able to enjoy premium holiday provided adequate cash value has been accumulated
5. able to adopt average premium throughout whole life, premium relatively higher in the early age of the life assured but cheaper in the later age
6. good for savings (subject to return projection) but provide limited protection

 Features of Investment-Linked Policy include:

1. whole life protection but subject to cash value reserved
2. flexibility on premium to be paid and keep paying up to age 99
3. change of premium does not necessary means that Sum Assured must be revised as well – depends on cash value
4. can enjoy premium holiday provided adequate cash value has been accumulated
5. insurance charge is paid according to age. Therefore, cheaper at early age but higher at the later age
6. premium relatively much lower but able to provide immediate large protection. Meanwhile, by investing the premium saved able to provide better return as compare with whole life

In the next posting, I will share with you about which insurance should we opt for.