Best Life Insurance Policy Comparison Singapore | MoneySmart

What Is Life Insurance?

The purpose of life insurance is to protect you and your family's financial stability in the event you are diagnosed with total permanent disability, terminal illness, or even when you pass on.

Financial Stability

Let's say you have a HDB BTO, two children, and elderly parents – but you are the only one drawing a monthly salary to support the family. If you pass on, your dependants (family members who rely on your income to live) may be left without any source of money to keep their lives going. Here's where your life insurance comes into play – your insurance company will give your family a lump-sum payout cheque (e.g. S$250,000) from the life insurance plan you have purchased.

Sum Assured

This lump-sum payout amount is not random, it should be chosen by you (and your spouse) when you first apply for the life insurance plan. Basically, it should cover the needs of your family for a short period of time, for example, one year before your spouse goes on to find a new childcare arrangements for your children, and a new job to sustain the family.

When To Buy

A general rule of thumb is this – the younger you are, the lower and cheaper your premiums will be since you will likely have lesser health issues. So, if you are in your 20s, you might want to start thinking and shopping for insurance. Life insurance may not the most romantic date-night topic to think and talk about, but you will need to bring this up at some point in your adulting and BTO aka family planning journey.

What Are The 3 Types Of Life Insurance?

Types of Life Insurance	Benefit	Who Is It For
Whole Life Insurance	Offers you a lump-sum payout in the event of disability, terminal illness, critical illness (depends on your choice of plan), and death, with possible cash returns – for your entire life.	Young adults, professionals, and homeowners
Term Life Insurance	Offers you and your family a lump-sum payout in case you are disabled, terminally ill, critically ill (optional), or in the event of your death – up to a certain age only, e.g. 75 years old.	Fresh graduates, first-time insurance buyers, and first-jobbers
Universal Life Insurance	Often offered to high net-worth individuals, a Universal Life insurance plan offers you the usual whole life death benefits – although with the flexibility to change your sum assured and premiums anytime, and the premiums you pay can be investment-linked.	High and ultra-high net-worth individuals considering legacy planning

Term vs Life Insurance

So, you've heard of people buying term life insurance, and others buying whole life insurance (commonly referred to as life insurance in short) – but what are the similarities and differences between term and whole life insurance?

Term Life Insurance

Term life insurance covers you for a fixed period of time (also why it's named term) – mostly until 75 years old. That means, if you are diagnosed with terminal illness, total permanent disability, or pass away before 75 years old, your family will receive the lump-sum payout you were assured for. However, if you outlive your plan (aka live beyond age 75), your term insurance plan will automatically end and you will not get any of your money back.

Whole Life Insurance

Whole life insurance on the other hand, commonly covers you up to age 99, 100, or death (depends on your insurance company). If you outlive your plan, you will get guaranteed and non-guaranteed cash returns. You will also be able to add a multiplier (sometimes known as additional coverage) for a fixed number of years to boost the total sum you're assured for. Whole life insurance premiums generally cost 10 times more than term insurance due to the length and flexibility of coverage.

Whole Life Insurance

What is whole life insurance? Is it a good investment? What are the pros and cons of whole life insurance plans? Whole vs term life insurance is one of those never-ending arguments – you're either a whole life insurance type of person, or you're a term insurance person. Universal life insurance? Forget it, those people won't be reading this page. Below, we list out the advantages and disadvantages of a whole life insurance plan:

Pros#1

Life expectancy. In Singapore, the average Singaporean lives up to 82.9 years old (as of 2017). However, most term insurance plans only cover you up to 75 years old. That means, if you live past age 75 (aka outlive your plan), your term insurance plan will automatically end, and you will not get any money back. You can see your premiums as wasted, or thank your premiums for having offered you coverage up till an old ripe age of 75.

Pros#2

Cash returns. While term insurance does not guarantee any cash returns if you outlive your policy, an endowment whole life insurance accumulates cash value over the years and may even offer you a guaranteed (confirm you will get back) and non-guaranteed sum of cash if you outlive your policy (some whole life policies end at age 99 or 100).

Pros#3

Investment-linked. Some people are drawn to the fact that some whole-life policies can be linked to investment funds – meaning the monthly S$300 or S$400 premiums that you pay will be pumped into your choice of investments. However, you don't get guaranteed cash returns with such plans since your money will be subject to the economy and market forces – yes, you could lose your money.

Cons#1

Money. Whole life insurance plans' premiums generally cost 10 to 12 times more than term life insurance plans' premiums since they effectively cover you for a longer period of time (up to age 99, 100, or death depending on your policy). If you are in the late 20s, your annual whole life premiums start from around S$4,000 per year for just S$250,000 sum assured (your death payout).

Cons#2

Necessity. Some individuals believe that your children or dependants don't necessarily depend on you their entire lives. At some point, your children will be financially independent and they will no longer need your whole life insurance payout to survive when you pass on. Therefore, these people believe that it's not worth forking out so much from your retirement funds (S$10,000 upwards annually in your 50s and 60s) for a whole life insurance if your children are financially independent.

Cons#3

Lose Money. If you purchased a whole life investment-linked policy (ILPs), and you and your insurance agent or advisor are both not familiar with the funds, you may quite easily lose your money paid in premiums (and a lot of people have so). Also, whole life ILPs are meant for the long-haul and if you need immediate cashflow (new house for new baby on the way etc.), then it might result in losses when you surrender your plan early.