Best whole life plans

Widest list of medical conditions: AIA, HSBC Life (Previously AXA)

Lifetime coverage for total permanent disability: Singlife

Longest multiplier effect: AIA, China Life, Etiqa

Best to keep up with inflation: Singlife, Tokio marine & Great Eastern

Why buy whole life insurance?

• Income replacement purposes
• Legacy planning
• Future-proofing for a child with a lifelong disability
• Inheritance tax planning for assets in countries with taxes such as U.S. stocks

Paricipating fund historical returns across all providers

Although the rate of return stated in the policy is a projection, the actual rate of returns depends on the investment performance of the participating fund. We thought you might be interested in the historical returns from 2005-2021:

Credit ratings by provider

Key terms used in whole life insurance

Insurance policies can be confusing to most people, but it’ll make more sense after we break down some key terms used in the contracts. Here are the key terms you should know

1. Cash values

Cash values in the policies are a result of profits from the insurance company’s participating fund. Your share of the profit is paid in the form of bonuses or dividends to your policy. The size of your share is determined by the sum assured of the policy.

Bonuses or dividends comprise of guaranteed and non-guaranteed components as they depend mainly on the investment performance of the insurer’s participating fund. When you make a claim, bonuses or dividends which have been declared will be paid in addition to the sum assured (in some cases it won’t).

2. Policy loan

You can also borrow money from the policy. Borrowing from your policy is referred to as a policy loan or automatic premium loan. The interest rates are about 5.5% p.a. on average. If you do not repay the premium loan before a claim or maturity of the policy, the payout sum will be reduced by the loan amount upon a claim or at maturity. That means, if you take a loan from the cash value, this loan amount is taken into account when the policy ends, or if you make a claim.

And if you surrender the policy, you can withdraw the entire cash value accumulated thus far in the policy. But then you’ll no longer have coverage.

3. Guaranteed death benefit and non-guaranteed death benefit

• Guaranteed death benefit = base death benefit

This payout is the main benefit promised by the policy. In this example: $50,000

• Total sum assured = base death benefit + additional cover (multiplier)

This refers to the coverage amount after taking into consideration the multiplier chosen.
In this example: $50,000 x 2 times multiplier = $100,000

• Total death benefit = Total sum assured + non-guaranteed investment return

The non-guaranteed investment return increases with time, hence this helps to increase the total death benefit as years go by.
In this example: The total death benefit after 1 year would be $100,100 assuming 3.25% return or $100,250 assuming 4.75% return. The actual total death benefit will be determined by the actual investment returns.

4. Multiplier

This term emerged sometime in 2015 and this feature is seen in most whole life policies offered. When you add a multiplier, it multiplies and increaes the underlying coverage. There are two ways a multiplier can work and they are illustrated here. 

Let’s understand this better with an actual example from Singlife:

“Base Cover” / Death benefit: $50,000

“Additional cover” /Multiplier effect of 2 times: $50,000

Total sum assured: $100,000

This means the death benefit is multiplied by 2 times and the actual coverage is $100,000.

Source: Singlife

However do note that the multiplier expires after a fixed age. In this example by Singlife with Aviva, it expires after 31 years, at the age of 70. 

The images below are extracted to show you the effects before and after the multiplier expires.

Note that Singlifes’ policies provides bonuses AND mutliplier in the total sum assured.

Source: Singlife

The effect on the expiry shows that the total coverage amount falls from $127,505 at age 70 to $85,894 at age 75. While the illustration here does not show the calculations for ages inbetween, the coverage at age 71 will be closer to $50,000 + $27,505 = $77,505.

5. Premium term

This refers to the years in which premiums must be paid.  These days, you have the option to pay premiums for a shorter duration than the actual policy term. 

So in this example, the coverage is for life, and premiums are only paid for 20 years. In other words, you will still enjoy the coverage after 20 years even though you stopped paying for premiums.

Options for premium terms can be as short as 5 year or payable till age 65. This has to be decided at the point of purchase and you cannot change it afterwards.

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What sort of illnesses are covered?

To ensure that consumers don’t get confused by varying definitions of the same medical conditions used in the contracts, definitions of critical illnesses are standardised by theLife Insurance Association of Singapore (LIA). This means that all providers must follow the definitions used in the contracts for the key 37 critical illnesses, as defined by LIA.

However everyone will try to differentiate their products so insurers have since added additional medical conditions covered, to make their offerings more attractive. This includes certain early stage critical illnesses and women’s illnesses. The insurers are free to define these terms to what suits their policy design.

What is not covered

1. Pre-existing conditions

During the application, you are required to declare your current health condition. If there are any medical conditions that are chronic or ongoing, the insurer will likely exclude coverage for that medical condition. This process is called medical underwriting.

Some conditions that will be excluded or result in the entire application being declined:

• Prediabetes and diabetes
• Hypertension
• High cholesterol
• Breast cysts
• Polycystic ovarian syndrome
• Slipped disc

2. Treatment costs in hospital

Whole life plans with critical illness riders added on will provide a lump sum payout upon diagnosis of a critical illness listed in the policy.

In Singapore, we found that many people had the impression that life insurance payouts should be used to pay for treatment costs. This is inefficient, and not advisable.

This is because medical costs increase with time due to inflation. And since the whole life policy payout sum is fixed, this will not be adequate to cover medical costs later in life.

This does not mean that you can’t use the payout to pay for medical bills—but this should not be the intended use of the insurance policy, unless you are unable to get hospitalisation coverage.

In Malaysia, much medical insurance coverage is embedded in the life insurance policies themselves, so this principle does not apply.

3. Self-inflicted injuries

If there is an attempt to commit suicide and results in total permanent disability, the policy will not admit the claim. However since year 2002, all policies will cover death by suicide after 12 months of continuous coverage.

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Why buy earlier than later

Reduce chances of exclusions

You want to be covered for as many things as possible, ruling out exclusions that could void your claims. As we age, we are more prone to diseases, so the odds of getting covered without any exclusions are lower.

Lower premiums

For whole life insurance, your premium rates are determined at the point of purchase, and will not increase after. It’s best to lock it in as early as possible.

How much life insurance is enough?

It all depends on your intentions. The most common purpose would be to replace income in the event of critical illness. One of the common critical illnesses in Singapore is cancer, and with treatment for cancer is so notoriously expensive, it could bankrupt you and your family.

Read more: Cost of cancer in Singapore

1. Determining the required sum to cover

Life insurance calculation: A sum to cover your annual household expenses for 10 years or by the period you have indicated. If you have children, the education fund required is also added into this sum. Existing savings and investments are taken into account.

Disability calculation: A sum to cover 10 years of annual household expenses in the event of disability.

Critical illness calculation: A sum to cover 5 years of current annual income in the event of critical illness.

Early critical illness calculation: A sum to cover 2 years of current annual income in the event of critical illness.

Try this calculator to determine your insurance needs.

2. Budget

Knowing how much you should be covered is the first bit. Premiums would depend on a few factors: sum assured, age of the insured person, gender and smoker status. Get your insurance quotations based on your required sum needed and check if the premiums are within your budget. 

3. What if the premiums are too expensive?

• Consider reducing the sum assured
• Consider term insurance instead or a combination of both term and whole life insurance 
• Increasing the duration of the premium payment term

What happens to my policy if I live till 100?

If the term of the policy is for life, the policy will continue for as long as you live. If the policy term is till 99 or 100 years old, the policy will terminate and the insurer will pay you the sum assured plus any additional bonuses, deducting any premium loans.

What happens if an insurer collapses?

Singapore has an organisation called the Singapore Deposit Insurance Corporation Limited (SDIC). Under the SDIC, the Policy Owners’ Protection (PPF) Scheme has been set up to protect policy owners, in the event of a life or general insurer going bust.

This is pretty much an “insurance policy” to protect life insurance policies. The insurers pay a levy for each insurance policy they issue.

Entitlement under the PPF Scheme for Life Insurance Policies:

Individual life and voluntary group life policies (with the exception of annuities): Cap of S$500,000 for the aggregated guaranteed sum assured and S$100,000 for aggregated guaranteed surrender value per life assured per insurer.​

Source: SDIC

Back to the Aviva example: In the event the insurer fails, the policy is protected up to a sum assured of $50,000 (guaranteed death benefit) plus any bonuses declared from previous years.

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