To buy term or to buy life? Even though the premium is cheaper than whole life insurance, term insurance is not sought after in KK. In general, customers like to see returns on their premium paid. Most of those above 35 yr old would have committed whole life policy. After more than 10 years of paying, they will ask themselves whether it is worth continuing paying the premium when the returns are not attractive and the sum assured is low.
Insurance premium is a payment you pay against the risk of you dying. When a 30 y.o. non-smoking young man buy a policy of RM100,000, the insurance company use statistical data collected over years to determine what are the odds of him dying at that age. Assuming 5000 young man of that age buy the same insurance, and basing on the statistic projection, 10 would die. Therefore, RM1 mil will be paid out. That means the premium must be at least RM200 + administration cost + marketing cost + agent's commission + profit for insurance company. If the policy offers cash returns or bonuses, the extra money depending on the company's promise to make the policy more attractive will be added to the premium.
If you buy term insurance that don't give you any cash return, and you buy a limited term only, the premium will be much cheaper than whole life policy. As a person gets older, the chance of dying is higher. Every one must die one day, therefore, the chance of insurance company paying out to whole life policy is confirmed. Because of that, premium for whole life is certainly much higher.
When deciding whether to buy term or whole life, the answer comes back to the purpose of committing an insurance policy. Do you buy against the risk of you not being able to see through your children becoming financially independent? Do you buy because you want the returns?
Finally, insurance is insurance. Insurance is not an investment. If you want investment, invest your money elsewhere.
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