life term insurance singapore

 

 

DO YOU NEED TERM LIFE INSURANCE?

 

Term Life Insurance is the most basic product in the range of life insurance products available in the market today. It is a simple product with the clear intent of providing you with a sum assured that will be paid out upon the death of the life insured.

 

As it is focused on only one thing, i.e. protection in the event of death, this means that this is the product that is guaranteed to provide you with the highest coverage at the lowest premium.

 

The cost of a Term Life Insurance product can be very affordable and should always be the first product an individual with dependents should consider. Because Term Life Insurance is a simple product, it is probably the most price competitive insurance products you can find. Yet, there are often still variations in the premiums charged acrossed insurers.

 

Use a comparison website to get the best quote from the different players in the insurance market.

 

 

 

WHAT ARE THE KEY FEATURES OF A TERM LIFE INSURANCE PRODUCT?

 

Because Term Life Insurance is structured to provide only a death benefit, it does not have any other features like cash value (also known as a surrender value or a maturity value) or any other investment elements.

 

Savings and Investment elements are additional features that you will not need if your fundamental intent is to obtain a high sum assured to protect your loved ones in the event of your death.

 

The death benefit, also known as the sum assured, is the lump sum amount of money that the Insurance Company will pay to your beneficiaries if you die during the term of your policy (i.e. the Policy Term). You can select the Policy Term based on how many years of protection you wish to be covered for.

 

We set out some of the key considerations you need to think about when deciding on your Policy Term. Some Insurers do limit the length of the Policy Term depending on your age at the time of policy commencement. As there is no cash value upon surrender or maturity, if you do wish to terminate, or if you outlive the Policy Term of your Term Life Insurance policy, you will not get back any money.

 

There may however, be a few minor variations which are pure protection in nature and can be added to the product as a rider:

 

  • Terminal Illness Benefit:

This pays out a Terminal Illness Sum Assured ahead of death benefit if you are certified by a doctor to be terminally ill, i.e. you are likely pass away within 12 months.

 

  • Total and Permanent Disability Benefit:

Pays out the sum assured earlier to you if you are permanently disabled.

 

  • Waiver of Premiums:

Future premiums required could be waived upon Critical Illness.

 

  • Payor Benefit Premiums: 

Future premiums required are waived if the person paying the premium becomes disabled or dies. This rider is most often included if the life assured is a chld or the spouse of the policyholder.


 

 

SO DOES THIS MEAN TERM LIFE INSURANCE IS A WASTE OF MONEY?

 

Because there is no cash value upon maturity, it is not uncommon to think that Term Life Insurance ends up being money thrown down the drain if the life insured surives the Policy Term.

 

Tell a 30 year old that he will have to pay S$15,000 to S$25,000 over 30 years and may not get anything back and he will be sure to take a step back. But the truth of the matter is, Term Life Insurance does buy you a peace of mind by offering you the largest insurance protection for your premium dollar.

 

You will end up paying more premiums for savings plans (Endowments or Whole of Life plans) in order to get a cash value at the end of your life. This is because for each dollar you contribute towards a savings plan, a portion goes into paying for the same protection element while the other portion goes into investments in order to generate a maturity cash value.

 

So don't think that protection is "cheaper" under a savings plan!

 

 

 

WHO NEEDS TERM LIFE INSURANCE?

 

The purpose of Term Life Insurance is to provide for those who are financially dependent on you. These are your loved ones who would struggle in the event of your unfortunate demise and would include Children, Spouses, Elderly Parents or relatives who rely on you for an allowance or some form of support.

 

Since Term Life Insurance provides you with the most efficient protection is to money ratio, young working adults should get term insurance as one of their first insurance policies.

 

We cannot stress how critical and valuable Term Life Insurance is for people with limited means or savings due to its affordability and the level of coverage it can secure.

 

 

 

HOW MUCH TERM LIFE INSURANCE COVER DO I NEED?

 

The sum assured you should purchase will depend on your individual circumstances.

 

Some basic questions you need to be able to ask and answer are:

 

  • What proportion of the family income is supported by me? 

 

  • In the event of my death, who would be impacted? How much sum assured will I need on my Term Life Insurance to support them monthly / yearly? Apart from my children and spouse, do I need to support other family members like parents, grandparents, grandchildren, siblings etc.?

 

  • Will I need to provide for any educational needs of my children? Do I need to consider sending them overseas and what are the associated expenses?

 

  • Do I have any outstanding loans (mortgage, car, credit cards etc) that would be a financial burden if I die? 

 

  • What about final expenses like medical bills, funeral costs etc?

 

  • Do I plan to leave behind an inheritance / legacy? 

 

  • Have I considered inflation and how this will impact the amount I need to set aside?

 

 

A simple starting point would be to take a multiple of your annual income and adjust for the factors listed. A quick back-of-the-envelope estimation insurance experts would recommend is for you to purchase a sum assured of 5 to 10 times your current annual income as the amount of Term Life Insurance death benefit to purchase.

 

Try our simple Term Life Insurance Calculator to calculate a more accurate figure.

 

Do keep in mind that your family needs will most likely increase over time, especially as you grow older and earn more in the future. What seems like enough today may not be adequate in ten years. It is usually best to purchase an amount you can afford at the present time while at the same time considering your future needs.

 

 

 

 

 

HOW DO I DECIDE ON THE POLICY TERM I WILL NEED?

 

The Policy Term of your Term Life Insurance product will depend on your own individual circumstances. Most people will want the Policy Term of their Term Life Insurance product to cover them up to after their children are likely to have achieved financial independence.

 

It will also depend on whether you have any financial obligations and what's the outstanding duration of these. For example, if you hold a mortgage that will be paid off only in 30 years time, it could be well worth getting a Term Life Insurance plan with a Policy Term to match the same period. Do ensure you have considered all of such factors before choosing on the Policy Term.

 

Another suggestion we have is for you to consider buying multiple Term Life Insurance policies with different sum assured and different Policy Term to provide cover for your various financial obligations. For example, if you have a five-year old child and you wish to support that child through university or an advanced degree, you need a policy term period of 18 to 22 years.

 

You may also consider having another Term Life Insurance policy that covers your mortgage loans that corresponds to the mortgage tenure, or you could also consider buying another Term Life Insurance policy with a shorter maturity to cover your obligations to your aging parents.

 

 

 

I'M CONVINCED THAT A TERM LIFE INSURANCE POLICY IS WHAT I NEED. WHAT NEXT?

 

Find out the Term Life Insurance plans available in the market today and decide which Insurance Company you wish to insure with.

 

You will need to submit a Term Life Insurance application to the Insurance Company together with a basic declaration on your health status. The Insurance Company's underwriters will go through your application and decide whether they need you to go for further medical assessment. Once your application has been accepted, you will have to pay premiums to the insurance company regularly. This is usually on a monthly or annual basis throughout the policy term.

 

The amount of premium you will need to pay will depend on your sum assured, your age, the policy term and your health condition. While the premiums are typically guaranteed (and will no longer change throughout your policy term) for a Term Life Insurance product, depending on which final policy selected, the premiums may change from year to year*, increasing as you grow older.

 

The above are subject to the definitions as set out by the insurance companies.

*or a specified guaranteed period, e.g 5 years.