01/08/2024
POV: Have you been reading a lot on Reddit about people criticizing insurance with an investment component? Their mantra is "Buy term and invest the difference" (BTID).
As a financial planner who loves computations, let's dive into the numbers rather than just relying on hearsay. We'll compare our BTID versus VUL (Variable Universal Life) investment projections.
BTID after 15 years (fund at 6%): PHP 538,301
VUL after 15 years:
Fund at 4%: PHP 718,623
Fund at 10%: PHP 1,175,281
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Reasoning:
Term insurance premiums increase yearly based on your age, and the difference can be drastic. For VUL, premiums are fixed; the increases are within the insurance charges, which are much lower and minimal. Therefore, in the long run, VUL is much cheaper when compared to BTID regarding the insurance part. Consequently, the investable funds with VUL achieve higher projections.
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Conclusion:
At the end of the day, diversification is essential. Don't limit yourself to just VUL or just BTID. Don't put all your eggs in one basket. There is no perfect investment or one-size-fits-all solution. It always depends on your needs, your targets, and what you are capable of acquiring.
Happy investing, y'all (while being insured)!
