Seth’s Blog on Finance

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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These plans are based on a non-smoking man in his early 30s with a premium payment period of 25 years.

VivoLife has a very minimal MPV, and also lasts the shortest tenure amongst the three policies. Other than a negligibly lower premium rate, it is perhaps not a very compelling policy compared to the other two.

MyLifeChoice has a slightly higher MPV but lasts a shorter duration compared to TM Legacy Plus which extends until someone reaches 64 years of age. MyLifeChoice also projects slightly higher death coverage which makes it (potentially) superior to TM Legacy Plus after the latter’s MPV has ceased when the person hits age 64. The downside will be that MyLifeChoice offers less protection right after its MPV has ceased after the first 20 years of the policy.

Further to the above, MyLifeChoice has a few features that are quite unique.

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