Why Do I Need Term Insurance?
First things first, what is life insurance? Life insurance plans offer you and your family a lump-sum payout in case you are disabled, terminally ill, critically ill (an optional feature), or in the event of your death.
A term (or whole) life insurance plan will be important if you have family members depending on you. It serves to provide them with money to help them to tide through a short period of time, meeting financial needs such as school fees, daily expenditure, mortgage etc. if you pass on or are unable to work.
Unlike whole life insurance plans where premiums may increase, your term insurance's premiums are fixed so you can plan your finances ahead of time.
Across the major insurance companies in Singapore, Term insurance premiums range from S$18.67 to S$34.12 monthly (for S$500,000 assured for the next 20 years) and are generally way more affordable than whole life insurance plans.
Term vs Life Insurance
So, you've heard of people buying term life insurance, and others buying whole life plans (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.
Why Choose A Term Insurance?
Compared to whole life insurance plans, term insurance plans have lower premiums – which makes it suitable for young working adults, new parents, or new homeowners who may have higher financial burdens and loans.
A term insurance plan is definitely going to be simpler and easier to understand than a whole life insurance plan. You pay premiums, you get paid out if you pass on, or diagnosed with a terminal illness etc. Simple!
If you've just had a child, the life insurance coverage you need to have will increase. A term insurance plan can plug that gap for the next 25 or 30 years until your child is financially independent – after which you technically no longer need the plan.
Should You Buy Additional Life Insurance?
A common reason why some Singaporeans do not purchase additional life insurance coverage is because they already have group insurance from the company they work for. Yet, everyone’s life and health needs may differ – you should check your company's insurance policies for gaps. So, don't assume that your current life insurance and health insurance policies are sufficient, evaluate your total coverage, and consider purchasing additional life insurance to ensure that your family and children's needs are sufficiently insured until they are financially independent.
Best Term Insurance in Singapore
Best for: Fuss-free, online application and claims
Best for: One of the cheaper premiums for the same level of coverage competitors offer
Best for: Offers coverage up to 100 years old (or with guaranteed renewal until age 100)
Best for: Up to S$10 million in coverage for death and terminal illnesses
Best for: Offers coverage up to 100 years old (or with guaranteed renewal until age 101)
Best for: Smokers get to reduce their premiums to the standard non-smoker rates when they quit
Best for: Flexibility to choose your plan's currency, your premium payment period, coverage, renewal, and offers options to convert your plan
Term Insurance Premiums
|INSURANCE COMPANY||TERM INSURANCE PLAN||PREMIUMS|
|FWD||FWD Essential Life - Direct Term Purchase||S$21.32 per month for 30-year-old male (non-smoker)|
|Aviva||AVIVA MyProtector - Term Plan II||S$26.15 per month for 30-year-old male (non-smoker)|
|NTUC Income||NTUC Term Life Solitaire||S$28.50 per month for 30-year-old male (non-smoker)|
|Singlife||Singlife Term Life Series Two||S$23.25 per month for 30-year-old male (non-smoker)|
|AIA||AIA Secure Flexi Term||S$28.47 per month for 30-year-old male (non-smoker)|
|Tokio Marine||Tokio Marine Term Assure II||S$26.75 per month for 30-year-old male (non-smoker)|
|AXA||AXA Term Protector & Term Protector Prime||S$28 per month for 30-year-old male (non-smoker)|
|Manulife||Manulife ManuProtect Term||S$26.81 per month for 30-year-old male (non-smoker)|
|NTUC Income||NTUC iTerm||S$28.50 per month for 30-year-old male (non-smoker)|
How do I choose a Term Insurance plan?
What to Consider Before Buying A Term Life Insurance Plan?
Should I get a whole life or term insurance plans? It all boils down to what you believe in, and your wallet. Whole life insurance premiums are, on average, 10 to 12 times more expensive than term insurance plans'.
A term insurance plan gives you a fixed sum assured (e.g. $400k until you are 100 years old). However, you can customise your whole life plan's coverage to have S$1 million until you are 65 years old, and $250k until you pass on.
How Much Term Life Insurance Do I Need?
Which Conditions And Illnesses Are Covered?
The mainstay of a term life insurance plan is your life. It serves to protect your family's financial stability in the event that you pas on. In most cases, no matter what is the cause of your death, the insurance company will pay your family your sum assured out of goodwill. However, there are explicit exclusions such as suicide within the first year of policy ownership.
Total and Permanent Disability
Another common condition that you may see in most conventional term insurance plans is total and permanent disability – meaning that you have been medically certified to be totally disabled for life with no hopes for cure (aka permanently). This is a rare condition to meet or claim for. Therefore, newer term plans have dropped this coverage altogether.
It doesn't which illness you have been diagnosed with, but if your doctor states on your report that you have no hopes for any cure and you are given a stated number of days, weeks, months, or years to live, you have been diagnosed with a terminal illness.
This is not a conventional coverage in traditional term insurance plans. Usually, cancer coverage comes in the form of a rider which you have to purchase. However, newer term plans have included terminal cancer to its basic coverage.
How Do I Pay For My Term Insurance?
Methods To Pay
Most often, when you apply for and sign your policy contract, your insurance agent will set up a recurring payment on your credit card.
Otherwise, you can get your agent or call the insurance company to set up a recurring GIRO payment from your bank account to pay for your premiums.
Otherwise, you can go to AXS physical stations, the AXS website, or the AXS mobile app to pay your premiums directly.
Finally, you can also simply log in to your iBanking account on your computer or via your bank's mobile app. You'll find a "Pay Bills" section and you can select your insurance company to pay your premiums there.
How do I apply for a Term Insurance Plan?
Applying for a Term Insurance Plan through MoneySmart
Step 1Answer Some Questions
If you find downloading insurance policy brochures and comparing them side by side a hassle, our intelligent system can do the comparison for you. Answer some questions online and we'll have you going.
Step 2Speak To Our Insurance Specialists
After you submit your quiz, our expert insurance specialist team members may drop you a call to clarify your needs and explain your options to you. Seize this chance to ask our friendly colleagues the burning questions you may have about term life insurance!
Step 3Apply And Purchase Your Term Insurance
Once you have spoken to our insurance specialists, considered your options, and planned your finances, you are ready to apply for your term life insurance plan online through our portal.
Frequently Asked Questions
What is term insurance plan?
- What is term life insurance? Any term insurance plans basically means that the insurance policy is only valid for a fixed period of time – you will have a start and end date. Likewise, a term life insurance plan serves to offer you coverage for your life (and death) for a fixed number of years only – in the past it used to be only until 75 years old but newer term plans offer you coverage up to 100 years old.
Which life insurance – whole life or term life?
- Both term insurance and whole life insurance offer you a lump-sum payout in the event of disability, terminal illness, critical illness (depends on your choice of plan), and death. The key difference is flexibility and premiums – whole life plans are more flexible and customisable than term insurance. Term insurance, however, are around 10 times cheaper in premiums than whole life plans.
Does term life insurance cover accidental death?
- Yes, most term life insurance plans will cover accidental death. However, do check with your insurance agent to see if there are any exclusions that you should be aware of.
What is direct term life insurance?
- A direct term life insurance plan is one that you can purchase directly from the insurance company, without the help of an insurance agent. In fact, all insurance plans with the words "Direct", "Direct Purchase Insurance", or "DPI" in Singapore all fall under the same programme that's mandated by the government.
Should you get term life insurance?
- Term life insurance is suitable for you if you are in your first full-time job and have budget constraints, are a new parent of a child and need to increase your total life insurance coverage, or if you are a homeowner and you want to have sufficient life insurance coverage to help your partner or family pay for your mortgage in the event you are unable to work or pass on.
How much term insurance should I buy?
- How much coverage for Term life insurance do I need? The first thing is to understand that there is no need to over-insure. You'll need to cover your mortgage, any other renovation, personal, or car loans, your children's lifestyle and school fees, and your parents' retirement allowance (if you are still giving them monthly allowance).