Not impressed by life insurance policies which charge astronomical premiums? Then you might want to consider its much simpler, straightforward and cost-effective sibling: Term life insurance.
Both types of insurance are life insurance policies, which pay out a sum of money (your “sum assured”) if you pass away or become totally and permanently disabled. The money will go to supporting your dependents and helping with outstanding loans such as your mortgage.
What is term life insurance?
Term life insurance (or term insurance) focuses purely on the protection aspect without promising to help you grow your retirement nest egg.
Unlike whole life insurance, there is no wealth accumulation or investment component for term life insurance. You pay your premiums, you get insurance protection in exchange, and that’s it.
This is unlike whole life insurance, which builds up cash value over time. The problem with building up cash value is that it not only makes your premiums higher, but could also complicate matters should you suddenly be strapped for cash and need to make withdrawals. You also have to think about how your surrender value will be affected if you decide to ditch the plan.
With term life insurance, you are also not locked in all your life — you decide how long you want to be protected. So, if you buy a term life insurance plan with a 20 year term, you know you’ll commit to the plan for 20 years and that’s all.
So, in a nutshell, term life insurance can be suitable if all you need is protection and you are not looking to accumulate wealth through your insurance plan.
7 best term life insurance plans in Singapore
*Based on an annual premium for a 30-year-old, male, non-smoker with a policy term of 20 years and $500,000 sum assured.
1. FWD Essential Life term insurance
FWD Essential life is a term life insurance policy offering $50,000 to $750,000 worth of protection up to the age of 85. This is a plan for those who don’t need a high sum assured, as $750,000 is not a huge sum of money when it comes to life insurance.
They’ve got an optional cancer benefit which entitles you to your entire sum assured if you get a cancer diagnosis at any stage.
FWD is one of the most internet-friendly insurers out there as most of their plans can be purchased online. Essential Life is no different, and can be a good choice if you’re too lazy to speak with a financial advisor.
FWD Essential Life is renewable until you hit the age of 85, or until the policy is discontinued.
Sample premium: $21.32 for a 30-year-old, male, non-smoker with a policy term of 20 years and $500,000 sum assured
2. Aviva MyProtector Term Plan II
If you’ve got very specific ideas of what you want in an insurance policy, this plan might be for you.
Coverage, which starts from $100,000, is flexible, as you have the choice to increase it whenever you reach certain milestones in life. You can also choose between coverage of 5 of 10 years, or from 11 years up to the age of 85.
For those with 5 or 10 year plans, you can renew the plan without any medical underwriting.
They’ve also got quite an extensive list of riders, which can give you coverage for total and permanent disability, critical illness, early critical illness or multi-pay critical illness. You can also buy riders that will get you premium waivers in certain circumstances.
Sample monthly premium: $26.15 for a 30-year-old, male, non-smoker with a policy term of 20 years and $500,000 sum assured
3. Tokio Marine Term Assure II
Tokio Marine may not be the obvious choice when it comes to getting life insurance, but their term life insurance plan is actually quite solid. It offers protection of $100,000 and more against death, total and permanent disability and terminal illness, without the need to buy additional riders.
The plan also offers policy terms of 5 or 10 years, or from 11 years up to the age of 85. You can also add on to your coverage in the event of certain milestones in life like marriage or parenthood.
The plan is offered in four currencies — SGD, USD, GBP and AUD. That makes it worth considering for expats or Singaporeans working abroad.
Sample monthly premium: $26.75 for a 30-year-old, male, non-smoker with a policy term of 20 years and $500,000 sum assured
4. Manulife ManuProtect Term insurance
This yearly renewable plan, which offers protection of $75,000 onwards from death and terminal illness, is fairly customisable. You can choose between 5 to 10 year terms that are automatically renewable until age 85, as well as terms ranging from 11 to 40 years, or until age 65, 75 or 85.
They’ve also got a decent number of optional add-ons, including riders for total and permanent disability, critical illness and premium waiver.
Smokers, who are usually at a disadvantage when it comes to insurance, get to pay the lower non-smoker premium rates for the first 3 years. If they manage to quit during these 3 years, they can continue paying non-smoking premiums.
Sample monthly premium: $26.81 for a 30-year-old, male, non-smoker with a policy term of 20 years and $500,000 sum assured
5. AXA Term Protector term insurance
This renewable policy is one of the most flexible ones out there. It offers coverage up to age 50, 55, 60, 65, 70, 75 or 99. Alternatively, you can choose renewable terms of 5, 10 15, 20, 25 or 30 years. You can also choose from a sum assured of $100,000 to $2,000,000.
The plan is offered in 5 currencies — SGD, USD, EUR, GBP or AUD — so expats or overseas Singaporeans take note.
Another interesting feature is the Indexation Option, which lets you adjust your protection to take future inflation into account. If you opt for this, you can have your insurance cover (and premiums) adjusted every year in line with the Singapore Consumer Price Index.
Sample monthly premium: $28 for a 30-year-old, male, non-smoker with a policy term of 20 years and $500,000 sum assured
6. AIA Secure Flexi Term insurance
This plan, which offers a sum assured of $500,000 onwards, offers renewal terms of 5, 10, 20 or 30 years, or up to age 65, 75 or 100. It is one of the few plans that offers renewal up to the age of 101, which is great if you end up living a long life.
The plan covers you for death and total and permanent disability, but you can also give your protection a boost with their riders offering critical illness protection, disability protection and premium waivers if you get a critical illness or become disabled.
Sample monthly premium: $28.47 for a 30-year-old, male, non-smoker with a policy term of 20 years and $500,000 sum assured
7. NTUC Term Life Solitaire insurance
This plan offers coverage for death and terminal illness from $500,000 onwards, which is a pretty high minimum. You enjoy guaranteed renewal until age 75, with the possibility of getting covered up to age 100 if you choose your term wisely.
Their selection of riders is targeted at older people or those who live a long life. Available riders let you receive hospital cash, disability payout, dread decease payout, or payouts for early, intermediate or advanced stage dread diseases.
You can also buy riders which will offer you premium waivers if you get a dread disease or for a loved one’s premiums you are paying if you die.
One unique perk for those with a sum assured of at least $3 million is the one-time medical concierge service, which you can use to get a full medical check-up.
Sample monthly premium: $28.50 for a 30-year-old, male, non-smoker with a policy term of 20 years and $500,000 sum assured
How to start shortlisting term insurance policies
When choosing a term insurance policy, think first about the basic parameters:
- Sum assured: The amount of payout you need
- Policy term: The number of years you wish to have protection. If you’re not sure how long that’ll be, opt for a renewable policy.
Once you have the basics down, think about the riders and perks you wish to receive. For instance, if you don’t want to buy critical illness insurance separately, you might want to opt for a term life policy with a critical illness rider.
This article was first published in MoneySmart.