I thought this will be a good case study to look back on what I did recently at some point in the future.
I would not call this a mistake that I did because I think the policy has served its purpose for the past 4 years which I no longer needed it anymore. Still, if there is a mistake to point out, it’ll be that I’d be better off taking term back then.
Well, time cannot be rewind, so I guess life moves on from here.
My WL Policy
I am not an expert in this insurance area and is/will never be an area that will interest me so I am not comparing my policy to any benchmark or competitors.
My WL policy is a straightforward deal from Prudential multiplier which will cover me a sum assured of $500k upon ceased. This multiplier will be effected until the age of 60 before it will revert back to the original value of $167k.
I chose a 15 year option paying a premium of $543 every month and have been paying them the past 3+ years before I decided to surrender.
I paid a total premium of about $20k approximately during the course of my policy.
I was informed by an acquaintance in facebook that I can check out alternate 3rd party company that might be willing to buy over my policy.
I checked with purvis capital whether they will be able to offer a higher surrender value but the conclusion is they are not because the duration I have with the policy is too short. Else, usually on average they would be able to buy your policy at a 5% higher than the surrender value you might have with the insurance company.
In the end, I managed to receive a surrender amount of $4k, which sums up to about 20% of the total premium I’ve paid. The loss is 80% and about $16k in absolute value.
Why Did I Surrender?
This is a personal reason so I am sure there would be people who might disagree with me.
I reviewed my needs and cashflow and decided that my family no longer needs the policy as much as they did should something happened to me today as compared to 3 years ago. The amount of quantum we are talking about is always going to be subjective but we agreed and decided on what is enough.
Someone could argue that the policy can also be a good form of endowment in other uses, i.e if I keep them throughout the full 15 years and redeem them the next 20 years or something. I am not a big fan of endowment myself so that’s something not in my plan at all. Still, I think it’s worth mentioning that it CAN be useful to particular individual with certain needs so it is wrong to say that they are a total crap.
With more cashflow on my hand, I can have an alternate way to build up my wealth in different aspect which I think can also serve as a form of defense. Like a team of Barcelona, Offense is often a good way of defense. If you cannot defence, score more goals. But I think there needs to be at least some basic defence there and I think I’ve established that (not going into the details here).
How Do I Feel?
If there were anything to highlight, I think this part would be the most important of the lots.
First, I thought it was important to acknowledge that I have made a mistake buying a WL instead of a term.
Second, it was also important that I put my emotion aside, review my needs and decide on things swiftly. I could have let it dragged on for a few more years before deciding to withdraw and thought it was foolish. I thought it was important to be decisive and not wishy-washy about things. 80% loss, take it with stride and life moves on from there.
There are at least about 5 people in my circle of friends who thought that I would be suffering in this painful loss.
I guess this is the same with why people are frustrated with CPF because they are assuming CPF to be money that they would be depending for future retirement. In wealth building, I think it is prudent and conservative not to include them as part of our retirement strategy. So anything that comes out of it is a bonus, not a privilege.
I don’t want to give the impression that thinks that I belittle this amount of money but it is usually part of my conservative ways in building wealth strategy to exclude these particular things in my computation by taking a 100% provision so instead of feeling like a loss, it feels like a gain to me.
Yes, I know it is pretty silly to look at it that way, but my cashflow is actually better this month by $4k because of this.
* Again, this is a disclaimer to highlight that the products do not suit my needs at this point but does not mean it does not suit any individual at any particular point of time. Just need to be clear about that.