Life Insurance Guide in Singapore | Buying Life Insurance Policy Singapore

Insurance | Life Insurance

by Priyadarshini 31 March 2022

Life insurance protects the financial health and standing of your family. To comprehend how life insurance works, you must first comprehend the objective and purpose of life insurance policies. In this blog, we give you a life insurance guide in Singapore.

People take their life insurance policies very seriously because it includes the survival and lives of direct family members. This also explains why there is so much discussion regarding life insurance policies. Learn the fundamentals of life insurance and compare the many types of life insurance policies to make a more informed decision for you and your family.

Life Insurance Guide in Singapore

What is the purpose of Life Insurance?

Whether you get term or whole life insurance, the goal is to preserve your and your family’s financial security in the event you are diagnosed with a total permanent disability, terminal illness, or pass away.

Financial Security

Assume you have an HDB BTO, two children, and aging parents, however you are the only one who receives a monthly paycheck to support the family. If you die, your dependents (family members who rely on your income to survive) may be left without any means of support. This is where your life insurance comes in – your insurance company will pay your family a lump sum if you die.

Assured Sum

This lump-sum payout amount is not decided at random; rather, it should be chosen by you (and your spouse) when you apply for the life insurance policy for the first time. Essentially, it should meet your family’s needs for a short amount of time, such as one year before your spouse moves on to find new childcare arrangements for your children and new work to support the family.

Related – Life Insurance Policies in Singapore 

Types of Life Insurance?

Whole Life Insurance

Provides a lump-sum payout in the case of disability, terminal illness, critical illness (depending on your plan selection), and death, with potential cash returns — for the rest of your life.

Who is it intended for?
Professionals, young adults, and homeowners

Term Life Insurance

Offers you and your family a lump-sum payoff if you are incapacitated, terminally sick, severely ill (optional), or die – up to a particular age, for example, 75 years old.

Who is it intended for?
Graduates, first-time insurance consumers, and new employees

Universal Life Insurance 

A Universal Life insurance plan, which is frequently given to high-net-worth individuals, provides the standard whole life death benefits – but with the option to change your sum assured and premiums at any time, and the premiums you pay can be investment-linked.

Who is it intended for?
Individuals with a high or ultra-high net worth who are thinking about legacy planning

Life Insurance Guide in Singapore

Is Whole Life Insurance a smart buy?

One of those never-ending debates is whole vs term life insurance – you’re either a whole life insurance person or a term insurance person. What is universal life insurance? The following are the benefits and drawbacks of a whole life insurance policy:

Pros

Advantages of Life Expectancy

The average Singaporean lives to the age of 82.9 years (as of 2017). However, most term insurance policies only cover you up to the age of 75. That is if you live past the age of 75 (i.e. outlive your policy), your term insurance policy will immediately terminate and you will not receive any money back. You can look at your premiums as a waste of money, or you can appreciate them for providing you with coverage until the age of 75.

Cash Payouts

While term insurance does not guarantee any cash returns if you outlive your policy, endowment whole life insurance accumulates cash value over time and may pay you both a guaranteed (confirmed) and non-guaranteed sum of cash.

Investment-related Goals

Some people are intrigued by the idea that some whole-life policies can be linked to investment funds, which means that your monthly S$300 or S$400 premiums will be put into your preferred assets. However, such policies do not provide assured cash returns because your money is susceptible to the economy and market forces – therefore, you could lose your money.

Cons

Money

Whole life insurance prices are often 10 to 12 times higher than term life insurance premiums since they protect you for a longer length of time (up to age 99, 100, or death depending on your policy). If you are in your late twenties, your annual whole life premiums start at roughly S$4,000 per year for an amount assured of S$250,000 (your death payout).

Necessity

Some people believe that your children or dependents do not have to rely on you for the rest of their lives. Your children will become financially independent at some point, and they will no longer require your complete life insurance benefit to thrive after you die. As a result, some individuals consider that it is not worthwhile to spend so much of your money.

When should I purchase life insurance?

A basic rule of thumb is that the younger you are, the lower and cheaper your rates will be because you are more likely to have fewer health difficulties. So, if you are in your twenties, you should start thinking about and looking for insurance. 

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