So what is a “Term life insurance”?
This can be broken down to two parts:
A policy that offers a payout in the event you die or if you became totally and permanently disabled. There’s options to add to your coverage such as payouts if you got diagnosed with a life threatening illness.
It’s basically a type of insurance plan that covers you over a specified time period. This can last either through a fixed set of years, or an age cap.
So if anything happens to you during the specified period, you get a payout of whatever amount you’re assured for. But once your plan runs it’s course and nothing happens to you, you get…
To be fair, term life policies are the cheapest policies there is. So really can’t expect much la. People usually get them just for basic financial protection during their wealth building years.
So you know, you’re safe from becoming pok-kai if you suay suay kena illness or accidents etc? Yeah. you get the gist.
Here’re some factors you should consider before choosing a term life policy:
Likelihood of your dependents becoming independent
Are you the sole breadwinner of your household? At which age would your kids become self-reliant?
You’ll need to consider these when it comes to choosing your policy term. The last thing you’d want would be for your policy to expire when your kids are still reliant on your financial support and something happens to you.
Your family’s medical history
Some term life policies offer additional coverage and riders for permanent disability and critical illness on top of the usual death benefit.
If your family has any previous history with major illnesses, you’d want to get yourself protected as early as possible with the additional riders.
Because if you don’t and you really choi choi kena critical illness or doctor certify you as unable to work…Your whole life (and your dependents’) would be gone to the dust.
To be on the safe side, lock in at least a good decade’s worth of income payout to secure your future.
Your purpose of getting an insurance plan
Are you getting the policy plainly to protect yourself against any unforeseen circumstances? Or are you using it to build your financial wealth?
The main advantage of getting a term life insurance would be their low premiums, but these plans only serve as a safety net in case something really bad happens to you. They do not serve as any form of investment.
If you’re unsure of what you’re intending, you’d want to get a plan that provides options to convert your plans to whole life or endowment plans just in case. One example would be AIA’s Secure Term Plus (II).
This goes without saying… but always remember that lower premiums are not necessarily the better-value options and vice versa.
Some policies allow adjustable options to increase or decrease your plan as you age. You’d want to consider a plan that gives you such flexibility in the event you’d like to extend your coverage to include any loved ones in future.
Despite the above considerations, a term life insurance is at the very end of the day, an insurance plan to help your dependents (young kids, elderly parents) tide through in the event you die.
So in short, make sure you can affordably and effectively achieve that purpose. If you are interested in getting Personal Accident coverage, find out more here.
This article was first published in MoneySmart.