Life Insurance
Life Insurance
Understanding Term Life Insurance In Singapore
Term Life Insurance is a type of life insurance that covers against death, terminal illness, and total permanent disability (TPD).
Unlike whole life policies that cover for the rest of your life, term life plans only provide coverage for a specified period. Given that term life is generally “pure” insurance, these policies have no cash value other than the guaranteed death benefit.
Who is Term Life Insurance appropriate for?
If you’re the breadwinner of the family, then you need life insurance to protect your loved ones from losing their main source of income in the event of your passing away. Life insurance can provide immediate financial benefit to dependents upon premature death of the insured person.
Which life insurance is better for you? Term or others?
Term Life Insurance is much more affordable when compared to other types of life insurance with an investment or savings component. A term life insurance policy is a suitable option for recent, young graduates who may not be on their financial feet yet.
Once you’ve decided to embark on a new journey in life, whether it is getting married or buying a home, it is crucial that you purchase a term insurance as it is likely incumbent on you to support your family or pay off a mortgage.
Advantages of Term Life Insurance
Compared to Whole Life Insurance, the advantages of Term Life Insurance include:
- Affordability: More affordable than cash-value life insurance
- Flexibility: Coverage can last as little as one year (policies usually come in 5-, 10-, and 20-year terms)
- Zero loss upon cancellation: Much of the policy’s premiums go towards “pure” life insurance coverage. You can avoid the loss of investment returns, which otherwise happens upon the cancellation of a whole life insurance policy.
- Simplicity: Exclusions applicable to most term life insurance policies are similar. Term life insurance is easy to understand, which makes it simple to shop around and compare rates.
- Closing the protection gap: Households in Singapore have the highest average mortality protection gap per household across the Asia-Pacific. In total, the mortality protection gap per Singaporean household stood at S$887,489 in 2019. The protection gap can be closed by using more affordable term life insurance products.
Singapore Term Life Insurance Premiums
There are two basic types of term life insurance policies: level term and yearly renewable term. Level term means that the premium stays the same throughout the duration of the policy which tends to come in 5-, 10-, 20- or 30-year terms, or up to age 65, 75 or 100. Yearly renewable term means that the premium either rises or drops, in one-year increments, over the course of the policy’s term.
Therefore, if you’re considering a yearly renewable term life policy, you may benefit from the following example of monthly premium:
30-year-old male non-smoker (yearly renewable term)
| S$200,000 Term Life Insurance | |
| Sample Monthly Premium* | S$8.35 |
Since the level-term premium incorporates premiums based on future perils, if you’re considering level term life insurance, you may wish to estimate the annualized premium:
30-year-old male non-smoker (10-year renewable term)
| S$200,000 Term Life Insurance | |
| 10-year total premium* | S$1519.2 |
| Annualized premium* | S$151.92 |
Bowtie insight: While it appears that a level-term policy can help you better manage your future premium payments, given that most insurers these days can provide comprehensive premium schedules for your reference, it is not difficult for you to manage your budget even while renewing your coverage yearly. As shown above, with a S$200,000 term life insurance, choosing to renew yearly can help you save at least S$51 the first year. ^
- ^Premium savings might drop with the increase in age. The actual amount saved is predicated upon specificities of the insurance plan and the insurer’s circumstances.
- Calculated premiums above are only for reference. Your actual premiums are influenced by conditions such as tenure, inflation, and underwriting.
Which factors affect your insurance premiums?
The premium structure for Term Life Insurance is generally straightforward. Most companies consider the following 3 factors when determining standard premium rates: age, gender, and smoking habits. Some insurers provide options to pay annually or monthly; once in a while, companies also offer first-year premium discounts. These factors can all affect your insurance premiums.
It is worth noting that insurers also calculate the level of risk through underwriting. Upon discovering factors that may result in a higher risk of mortality, such as suicidal inclinations, depression, or vascular diseases, an additional cost (loading) may be built into the insurance policy.
How much life insurance do I need?
The amount of term life insurance coverage on the market in Singapore usually ranges from S$50,000 – $500,000. More isn’t always merrier. The more life insurance coverage you buy, the more you’ll pay. Each family’s financial situation differs from the other. To calculate how much life insurance you need, consider the following factors:
| Potential financial burdens for your family | Beneficiaries |
| Long-term debt (e.g. mortgage) | Spouse or child |
| Education expenses | Child |
| Living expenses | Spouse or child |
| Dependent care expenses | Retired parents or child |
Besides the burdens mentioned above, some folks take funeral expenses into consideration when calculating how much life insurance they need.
Bowtie Insight: Certain medical or critical illness insurance policies already provide some level of life protection. We suggest that you be mindful of this to avoid unnecessary premium costs.
Term Life VS Whole Life
| Term Life | Whole Life | |
| Coverage Term | Usually available in 5-, 10-, and 20-year terms
When the policy expires, it typically allows you to renew until you reach a specified age. |
Lifelong coverage (or until insured person turns 100) |
| Premium | Affordable | Much more expensive |
| Death Benefit | Yes | Yes |
| Cash Value | No | Yes |
| Premium Structure | Level-premium/ yearly-renewable | Level-premium/ limited-payment |
| Brief Note | Although term life insurance does not have a cash value, the majority of the policy’s premiums go towards life insurance coverage, rendering it a cost-effective option. | A whole life policy has a savings component that can build cash value over the years, but it costs more than term life insurance. If you decide to give up, or surrender, your policy, you may incur losses. Nevertheless, as long as you’re able to keep up with the premiums, it is a legitimate option. |
Whole life insurance provides lifelong coverage, but its monthly premium is higher than that of term life insurance. Only a small portion of the premium contributes to life protection; the majority goes towards commissions, investment management expenses, investment principal, etc. (most insurers provide guaranteed and non-guaranteed benefits, which are generated from investments).
If you wish to acquire low-cost and stable returns, besides purchasing whole life insurance, you may consider investing in low-risk investment options through brokerage-free securities trading platforms.
Term Life FAQs
1. How do I choose the best Term Life Insurance?
Term Life Insurance is pretty straightforward: typically, if the policy is in force at the time of death, your beneficiary receives the death benefit.
Therefore, when comparing different products, you may first consider the difference in premiums. Quite a few insurers provide first-year premium discounts. However, since life insurance tends to cover a considerable period of time, the pre-discount premium serves as a better indicator of your actual cost.
Purchasing life insurance is a big decision. Apart from the prestige of an insurance company, one should also consider the following when making a decision:
- Territorial Limits: For instance, if you’re planning to emigrate to Canada, an insurance policy that only provides coverage to the insured within Singapore would be inappropriate for you.
- Exclusions: Exclusions are unique to each particular policy. For example, some insurance policies on the market clearly state that in case the policyholder commits suicide within 1 year from the date of revival of the policy, the claims are not payable by the insurer. In addition, based on the insured’s health conditions, new exclusions might be added to the policy. You are encouraged to choose a life insurance policy that best caters to your specific needs.
2. Is life insurance payment impacted by the cause of death?
There are only two possible outcomes for the term life insurance claim: the insurer either pays the claim in full or denies the claim in its entirety. As long as the cause of death is not excluded from the life policy, most insurers pay out the full proceeds at the death of the insured. Assuming that no further exclusions apply, the only reason that insurers might deny a claim is when the policyholder commits suicide shortly (typically within 1 year) after the policy is in force.
In fact, suicide is a common exclusion. But each insurer follows a different set of standards and definitions. To get a better grasp of your insurance policy, read it with care.
3. How do I buy Term Life Insurance?
Term life insurance is straightforward. Many insurers have introduced digital insurance platforms that consolidate underwriting, payment ,and policy authorization, letting clients purchase policies online within minutes. What’s more, with better access to insurance information, consumers can compare different platforms, banks, traditional agents and brokers against each other.
4. How to Claim a Life Insurance Policy?
In general, to claim a life insurance benefit, the beneficiary has only to file a death claim with the insurance company by submitting a certified copy of the death certificate. Different insurance companies may differ in their claims process (“Claims Process” link to article 5). Contact your insurance company for information on their claims process.
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The above information was provided by Bowtie Team. It is for reference only. In no event shall Bowtie be liable to you or to any other party for any loss or damage whatsoever or howsoever caused directly or indirectly in connection with your access to or use of the content thereon.
