- Life insurance serves to protect your family's financial health and status. To understand how life insurance works, you must first understand the intention and purpose behind life insurance plans. Everyone who has bought life insurance has asked themselves this same question: "When I die, how will my elderly parents, spouse, or children pay for my funeral bills, medical expenses, home loans and bills, school fees, and sustain their daily lives? If I'm no longer around to provide for them, how much money will they need?" Since it involves the survival and lives of immediate family members, people do take their life insurance plans very seriously. That also explains why there is so much talk about life insurance plans. Now that you understand the intention behind life insurance, you will also understand that the many types of life insurance plans you see out there (most commonly whole and term) addresses different family needs for people of all walks of lives – some people have extremely high sum assured like S$500,000 for their children and spouse's survival, while some only sign up for S$100,000 to foot their funeral bills (but they multiply their coverage by 5X to get a total of S$500,000 until age 70 to support their children while they are still studying). At the end of the day, the sum assured (the lump-sum payout) that you get via life insurance should sufficiently cover your family's essential expenses.
- No, you cannot transfer your life insurance plan from your current insurance company to another. Why? The answer is quite simple – the life insurance policy contract that you signed when you applied for this life insurance plan is a contract. In fact, all insurance plans are contracts which legally brings you into a relationship with your insurance company. You've heard this before from your insurance agent – your insurance company has to honour the promises laid out in the policy contract. Likewise, you have to honour your promises as per the contract as well. Still not too sure what that means? Okay here's an easy one – you can't buy a MacDonald's Big Mac Extra Value Meal and bring it into a KFC outlet to dine-in. They are rival companies with different products, and obviously you can't expect them to welcome each others' products.
- Yes. If you die of a natural cause such as cancer, your life insurance will cover you and offer your family the lump-sum payout you have been assured for. However, that's given that you have been honest and regularly updating your insurance agent and company of your medical conditions, such as the diagnosis of cancer, and any related pre-existing conditions etc. Also, you will only be eligible for your payout if your death was purely caused by cancer and you didn't participate in any high-risk, dangerous activities such as bungee jumping, scuba diving etc. that may have resulted in your death. If you have been diagnosed with a terminal cancer (given less than 12 months to live)< check your life insurance policy to see if terminal illness is included in the default list of benefits. If it is, you may be able to get your full payout.
- Your age primarily affects your life insurance premiums – as you grow older, your annual insurance premiums will increase as well. Why? That's because as you age, you are at higher risk of illnesses, medical conditions, and death. Also, there's the issue of pre-existing conditions. As compared to someone in his 40s, someone in his early 20s applying for a life insurance plan will most likely have lesser medical history and past illnesses logged in his medical records as well – therefore lesser pre-existing conditions and lower medical risk involved.
- On an individual level, do note that life insurance should not be seen as an investment product if you are considering buying life insurance as a way to grow your wealth. Instead, there are better avenues for financial investment. For insurance agents and financial advisors, the life insurance plans you purchase continually pays them a percentage in commission monthly or annually as long as your policy is still in force (aka you are still paying insurance premiums for it). Finally, for insurance companies, how do they profit from life insurance plans? Insurance companies profit when they receive more money paid by consumers like us in premiums as compared to the claims they've had to pay out in the same year. They also profit when the stock market performs well, and likewise the investments they've made with our premiums are performing equally well.
- Buying life insurance for a newborn, toddler, or child can be a pretty divisive topic. There are 2 schools of thought in Singapore – for and against – and your stance will largely depend on your beliefs, financial status, and the long-term plans you have for your child. People who believe that do not need to buy life insurance for your children often reason that: one, you child is not financially active and does not have dependents; two, at such a young age your child is unlikely to pass on or be diagnosed with critical or terminal illnesses; three, child life insurance is a marketing gimmick and there are better investment products for you to save up money to gift your child when you pass on. On the other hand, parents who are supportive of purchasing life insurance for their children often cite: one, you should never skimp and save on your child's insurance coverage as you never know if when he/ she may be diagnosed with a critical or terminal illness; two, a payout from your child's policy will enable you to pursue medical treatments and even allow you to stop work to give him/ her full-time attention and care; three, if your child were diagnosed with a long-term illness at a young age, this will affect his/ her eligibility when applying for future insurance plans in adulthood.
- Not too sure if you should get term or whole life insurance? It largely depends on your personal beliefs, priorities, and financial status. If you strongly believe in having insurance coverage till the end of your life, then you should look into getting a whole life plan. However, if you don't prioritise a lifelong insurance plan and are comfortable with a shorter plan covering you up to 75 years old, you can consider a term insurance. Do note that whole life plans are generally more costly than term insurance plans – on average, the annual insurance premiums of a whole life insurance plan is 10 times more than that of a term life plan's.
