Minimum Protection Value: MyLifeChoice vs TM Legacy Plus vs VivoLife

While whole life policies can be a relatively pricey way to obtain insurance coverage, there are some people who may be more inclined towards such policies. I will always point out the alternative strategy of buying term and investing the rest, highlighting the pros and cons of both strategies. A small allocation to a whole life policy and heavier emphasis on term coverage can often be a good way to deal with one’s insurance coverage.

A good trend that is occurring with whole life policies is the provision of a minimum coverage amount typically called Minimum Protection Value (MPV). A whole life policy may offer a sum assured of $X which gradually increases over the years as the insurer declares bonuses that add onto the sum assured. An MPV seeks to increase the amount by a certain factor for a specified number of years. For instance, it can double $X to $2X for the first 20 years of the policy. During these 20 years, the policy will pay the higher of either $X plus declared bonuses, or the MPV of $2X. It is usually the latter being the higher amount as the basic sum assured of a whole life policy does not increase so quickly.

Illustration on how MPV works

This is an non-exact illustrative graph of how the benefit amount of a while life policy with an MPV typically looks like:

In effect, it is somewhat like a normal whole life policy pegged with a decreasing term policy that lasts for 20 years (or however long the MPV is supposed to last) – as the whole life increases in sum assured, the decreasing term has a reducing sum assured and hence the nett sum assured is a level amount for the first twenty years. This is good for some people who for whatever misconceptions do not want to buy term policies – perhaps the most common reason being the illusion of a “premium refund” when one buys a whole life policy. The integrated MPV gets them higher coverage at a more affordable price, a little like compelling them to get a bit of term coverage.

Policies in the market

In the current market, there are a few compelling choices for whole life policies with MPV. VivoLife and TM Legacy Plus should be quite popular choices, which are recently joined by Aviva’s MyLifeChoice. Here’s a comparison between the different policies:

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