Buying a life insurance plan is a recent trend among Singapore residents; however, you should not be driven by this and end up choosing a plan that doesn’t suit your needs. For this reason, it is wise to identify and be conversant with the insurance policies offered in Singapore. This article will broadly cover term plans in Singapore as a type of life insurance available for purchase by Singaporeans. Read on to find out whether a term plan is ideal for your needs.
What is term life insurance?
Even before thinking of purchasing a policy, you need to understand what the term plan is. Basically, life insurance is a plan you buy from a registered insurance company. The company pays your family a lump sum in case you get a terminal illness, disabled, or die. Term plan in Singapore is a time-limited life insurance cover sold by insurance companies in Singapore. Term life insurance covers the insured for a specific period, mostly up to 75 years.
If you buy a term life insurance cover and live for more than 75 years, then your family will not get any financial support in the event of your death. However, if you die while your policy is still in force, your family will benefit from the coverage payout lump sum.
Why do you need term insurance?
There are several reasons that can justify your decision to have term life insurance. They include
- Family financial security: The main reason people take insurance covers is financial stability. In case you get hit by a terrible disease or get involved in an accident and end up losing life, your family members may suffer a financial burden. However, if you had a cover, then your family can be paid a lump sum and use it for your funeral arrangements and other functions that you performed before your demise.
- Constant premiums: Term insurance premiums are constant throughout. Unless you change the insurance package, therefore, you can plan your monthly income with minimal stress because you already know the exact amount to be paid as a premium.
- Less expensive: In Singapore, term insurance ranges from S$18.67 up to S$34.67 per month, depending on the coverage you buy. The cost is cheaper than whole life insurance, which demands higher premiums.
Term vs. whole life insurance
The difference between these two policies is evident in their names. Term life insurance covers you for up to a fixed age, typically 75 years. On the contrary, whole life insurance does not expire as long as you consistently pay premiums. If you buy whole life insurance, you just need to keep paying premiums, not unless you experience some financial crisis. In exchange for your premiums, your family will receive the coverage amount of your policy.
Additionally, whole life insurance premiums accumulate a cash value that you can use to pay premiums or take a loan against. Term life insurance policy, on the other hand, ends once you outlive. Besides, there is no cash value attached to the premiums you pay. The pros and cons of the best term insurance in Singapore are discussed below:
Pros of term insurance
- Lower premiums: The term plan in Singapore is far much cheaper than whole life insurance plans. This makes it suitable for the working youth who have many dependents on their father and other sons.
- Simple: a term life insurance policy is easy to understand compared to its counterpart as a whole. The premiums are paid, and the insured simply waits to be catered for in the event of your death.
- It is temporary: in the waking of modern life changes, it is almost certain that your life insurance needs will change too. Term insurance becomes a good option because it gives you room to expand on the coverage with regard to the changes you face in your family or individually. For example, if you get a baby, they will need to add him or her to the list of your beneficiaries.
- Does not earn a cash value package
- People with over 75 years cannot qualify
- In case you get past the agreed time, you will not qualify for coverage.
Term life insurance is a good option, especially if you are not too old. The plan needs to be renewed, which may not favor the elderly. If you fail to renew your term policy, you will have lost all the initial premiums. All in all, you have the freedom to choose either whole or term insurance. The best option for you will depend on preferences, priorities, and financial goals.