The mid-20s is the age when the majority, if not all, Singaporeans start to be financially independent. It is this period when you have minimal savings, and have to start paying for your bills. Given that you’re probably earning an entry-level income and have heavier expenses, would you want to add on an additional expense of life insurance premium to your plate?
In this article, we will explore why individuals in their 20s might not want to take on a life insurance, and why that might not be the wisest choice.
Life insurance is a complicated but important kind of insurance coverage. It mainly consists of two types — whole life and term life.
Unlike other insurance plans, life insurance pays out only after the covered policyholder passes away. The purpose of life insurance is to reduce any financial hardship that may arise from the lack of income the deceased will not earn any longer, together with any outstanding debts or financial obligations of the deceased that must be repaid.
Life insurance is your safety net for those big "what if" moments. It can be useful even when the death benefit is not triggered, so long as it is used appropriately.
Many Singaporeans in their 20s do not have life insurance coverage and do not feel an urgent need to source for one. Let us look at the reasons why.
To those in their 20s, there is a set of clear priorities when it comes to spending money, and life insurance is not on the list. Big ticket items such as houses and cars, fashion accessories like bags, watches and clothing come on top, and other personal indulgences come on top. You might even find bubble tea on that priority list.
However, as you mature, life insurance becomes increasingly important — especially if you have a family or debt. Many do not seem to realise this at an early age and come to regret not purchasing one when they were young.
The term life insurance, or perhaps insurance in general, is typically associated with the elderly or older people amongst Singaporeans in their 20s. Many do not feel a need to purchase life insurance as they feel that they are still young and have quite a distance to go before thinking about their mortality due to old age.
The truth is, life insurance is not simply about age. It is an umbrella that protects the people you care about. If you have a family or debt, life insurance is built for you.
Many feel that life insurance is too complicated, with too many insurers and policies in the market, and a long list of terms and conditions to look through. Learning about the various life insurance policies via surfing the internet is not sufficient to have a comprehensive understanding, and one would seek the help of a financial advisor, which many would prefer to avoid.
Here are some reasons why you should get life insurance in your 20s and not your 40s.
As health and age are important indicators of the premium payable for life insurance, your premium will be lower, making the policy much more affordable.
Your premiums remain the same for the duration of your policy unless you change the amount of coverage. Purchasing life insurance at a younger age locks in lower premiums and reduces the total amount you’ll spend on life insurance over the course of your lifetime.
You may not have dependents now, but that could change within a few years. Purchasing life insurance coverage now provides protection in place for the future when your children, spouse or ageing parents rely on your income. Dragging this process could make it more difficult and expensive to get coverage.
Even in your 20s, you may have student loans, credit card debt or even financing for a new car. In the case of an unfortunate event, life insurance can protect your parents or loan co-signers from the burden of paying off your debts.
Younger individuals, especially at the start of their careers, would have limited savings. However, they probably have the highest number of dependents and liabilities.
These could be parents who are approaching retirement age, younger siblings who need to be educated, or even grandparents with critical ailments. There could also be debts that need to be repaid, or a major forthcoming family event, such as a wedding or the arrival of a new baby.
The probability of a younger person having large savings to tide over any sudden financial emergency caused by their death, disability, or illness, is very low. Therefore, life insurance provides the best solution to protect your family’s financial stability and future.
Here are some suitable term life and whole life insurance policies for those in their 20s that we have identified.
| Sum assured | Plan tenure | Age 25 | Age 35 | Age 45 |
|---|---|---|---|---|
| $50,000 | 5-Years | $2.76 | $3.77 | $7.24 |
| 20-Years | $4.17 | $6.05 | $12.23 | |
| Age 65 | $6.45 | $8.02 | $11.53 | |
| $200,000 | 5-Years | $7.72 | $10.70 | $20.52 |
| 20-Years | $8.95 | $16.31 | $39.99 | |
| Age 65 | $18.42 | $25.61 | $39.82 | |
| $400,000 | 5-Years | $12.63 | $17.19 | $32.98 |
| 20-Years | $14.38 | $26.31 | $64.55 | |
| Age 65 | $29.82 | $41.39 | $64.20 |
FWD's direct-term life insurance offers death and total & permanent disability coverage (TPD) of up to $400,000 and offers the opportunity to buy a critical illness rider. You can get the plan for 5 years, 20 years or until you are 65.
FWD offers competitive prices for its $300,000 and $400,000 plans, with its premiums 10 to 25 per cent cheaper than the market average for 5 and 20-year plans regardless of your gender. You will also receive $5,000 for funeral expenses paid by the next business day after they receive the death certificate.
However, FWD is not the cheapest option for 25-year olds or those who are looking for plans with coverage of up to age 65. FWD's umbrella company, FWD group financial services, currently has a credit rating of BBB-.
| Sum assured | Plan tenure | Age 25 | Age 35 | Age 45 |
|---|---|---|---|---|
| $50,000 | 5-Years | $2.19 | $3.13 | $5.97 |
| 20-Years | $2.54 | $4.14 | $8.09 | |
| Age 65 | $5.14 | $7.38 | $11.40 | |
| $200,000 | 5-Years | $6.80 | $9.74 | $18.56 |
| 20-Years | $7.90 | $15.44 | $36.93 | |
| Age 65 | $15.99 | $22.97 | $35.46 | |
| $400,000 | 5-Years | $12.95 | $18.55 | $35.35 |
| 20-Years | $15.05 | $29.4 | $70.35 | |
| Age 65 | $30.45 | $43.75 | $67.55 |
Direct-Etiqa term life provides 5-year, 20-year and until age 65 plans with death and TPD coverage between $50,000 and $400,000. It is one of the cheapest options on the market for young non-smoking consumers in their 20-30s, as its premiums range between 10 to 47per cent below average for this age group.
It is especially affordable for females, as their 5-year plans with $50,000 of coverage cost less than $1.50 per month. Those looking for up to age 65 plans, $400,000 plans and older consumers may see premiums hover around average to 20 per cent below average. You can save a further 5 per cent by paying annually instead of monthly. Etiqa's credit rating according to Fitch is A-.
| Sum insured | Plan tenure | Age 25 | Age 35 | Age 45 |
|---|---|---|---|---|
| $50,000 | Age 70 | $54.12 | $74.42 | $114.17 |
| Age 85 | $51.39 | $68.07 | $96.56 | |
| $100,000 | Age 70 | $108.25 | $148.85 | $228.35 |
| Age 85 | $102.79 | $136.14 | $193.12 | |
| $150,000 | Age 70 | $162.37 | $223.27 | $342.52 |
| Age 85 | $154.18 | $204.21 | $289.68 | |
| $200,000 | Age 70 | $216.49 | $297.70 | $456.70 |
| Age 85 | $205.57 | $272.28 | $386.24 |
Etiqa's direct-whole life premiums cost slightly below average and if you choose to pay your premiums annually, you will save around 2.3 per cent.
Your plan tenure options are up to age 75 and up to age 85 plans and Etiqa will cover you up to $200,000 until your death or a specified maturity date. Since it is a participating policy, there is also a cash value and reversionary bonus accumulation attached to the plan. For extra coverage, you can also add a critical illness rider. Etiqa's current credit rating is A-.
| Sum insured | Plan tenure | Age 25 | Age 35 | Age 45 |
|---|---|---|---|---|
| $50,000 | Age 70 | $51.00 | $73.00 | $112.50 |
| Age 85 | $49.00 | $66.00 | $93.50 | |
| $100,000 | Age 70 | $102.00 | $146.00 | $225.00 |
| Age 85 | $98.00 | $132.00 | $187.00 | |
| $150,000 | Age 70 | $153.00 | $219.00 | $337.50 |
| Age 85 | $147.00 | $198.00 | $280.50 | |
| $200,000 | Age 70 | $204.00 | $292.00 | $450.00 |
| Age 85 | $196.00 | $264.00 | $374.00 |
Income's direct life insurance plan is competitively priced for older consumers compared to other DPI whole life plans.
You'll be covered for death and terminal illness until age 99 and total and permanent disability before you turn 65.
You will receive the sum assured and any accumulated bonuses upon a claimable event. Plan tenures are either up to age 70 or age 85, with the up to age 85 plans costing slight less than the up to age 70 plans. Income's current credit rating is AA-.
When money is tight, a term life insurance policy can offer a financial safety net for your family. Should you choose to purchase whole life insurance, owning it over several years will allow the cash-value component of the policy time to grow.
The longer you wait to buy life insurance, the more expensive it will get. In addition, you run the risk of deteriorating health as time ticks, which may make you ineligible for some life insurance at that point in time.
Ultimately, your decision to get life insurance will depend on your personal and family situation, along with your finances and obligations.
ALSO READ: 6 fatal life insurance mistakes that you could already be making
This article was first published in ValueChampion.