BEST OF TERM LIFE INSURANCE POLICIES

What is term life?

Term insurance is the simplest type of life insurance. It provides a payout to the insured’s family members upon death. Most term insurance embeds coverage for total permanent disability and terminal illness too. And there are options to add additional coverage for early to advanced critical illnesses, disability income and premium waivers too.

Unlike whole life insurance, term insurance like the name suggests is somewhat temporary as it provides coverage only for a specific time frame that is determined at the point of purchase.

Read more: Term Life Insurance vs Whole Life Insurance: Which Should You Get?

Term insurance could also be a standalone cancer only plan, women illness insurance, disability income plan. Careshield life, Eldershield, Dependents’ protection scheme (DPS) and Home Protection Scheme (HPS) are all considered term insurance.

Term insurance does not provide any cash values, or payouts if your policy expires before your insured event occurs.

Why do you need term insurance?

All types of life insurance helps to provide a replacement of income when the covered event is triggered. The sum assured is paid out in lump sum and would help replace the loss of active income stream.

What is a whole life policy?

All life insurance policies provide a lump sum payout in the event of death. You might have heard of phrases such as term life, whole life, and disability income insurance; these are all considered life insurance policies. The main difference between whole life insurance policies and the others, is that the whole life provides cash value after the third year.Life insurance often provides coverage for total permanent disability and terminal illness as well as part of the default coverage together with death benefit. We call this payout amount the sum assured.You can opt to include additional coverage such as critical illness and women’s illnesses. This can be done by adding riders to the main policy.Whole life policies are more complex than term insurance because they provide cash values after a minimum fixed period. In most cases in Singapore, this happens in the third year after the policy starts.

Refer to our insurance map here on the different types of insurance policies and what they cover.

There are two types of whole life insurance—“participating” and “non-participating”. Participating means you share in the profits of the company’s fund. That’s paid as bonuses or dividends to your policy, the sum of which is not guaranteed because it depends on how the participating fund performs.Non-participating, on the other hand, means a guaranteed cash value and/or claim benefit. But almost all whole life policies are participating, so let’s focus on this segment. Although it’s more complicated than term life insurance, whole life is the most straightforward form of permanent life insurance. Here we list the pros and cons of whole life insurance.

Term life policies provide a payout should these events occur

      • Death
      • Terminal illness
      • Total permanent disability
      • Early to advance stages of critical illness

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Widest list of medical conditions: Aviva, followed by AXA 
Lifetime coverage for total permanent disability: Aviva and FWD

Based on level term policies

InsurerCoverageGuaranteed increase coverage at key life events

Convertible to other whole life plans

Total permanent disability coverageNo. of medical conditions covered (Optional coverage)Unique featuresMaximum term
AIADefault:
Death

Terminal illness

Terminal cancer

Optional riders:
TPD

CI

Premium waivers

Convertible to Whole lifeTIll age 7043 Advanced StageProvides additional default terminal cancer benefit.Till 75; renewable to age 101
AvivaDefault:
Death

Terminal illness

Optional riders:
TPD

CI

ECI

Premium waivers

Multipay CI

Both options availableWholelife– 62 early and intermediate stage
– 60 advanced stage
– 6 recurrent
– 27 special conditions
Multi-currency optionTill 99 option
Aviva SAF termDefault:
Death

TPD

Optional riders:
CI

ECI

Disability income

Outpatient rider

 Till age 65– 37 advanced stage
– 10 early stage critical illnesses
 Till age 65; renewable to age 70
AXADefault:
Death

Terminal illness

Optional riders:
CI

ECI

Premium waivers

Accident

Disability cash

Convertible to Whole lifeTill age 70132100% premiums refund at the end of the term if no claims were made for term till 99

Limited pay option

Multi-currency option

Till age 99
China LifeDefault:
Death

TPD

Terminal illness

Optional riders:

No option for bothTill age 6538 Till age 65
China TaipingDefault:
Death

Optional riders:
Terminal illness

TPD

CI

ECI

Convertible to Whole lifeTill age 655 common conditionsOption for 100% premiums refund at the end of the term if no claims were madeTill age 85
EtiqaDefault:
Death

TPD

Optional riders:
CI

Both options availableTill age 10036 Till age 100
FWDDefault:
Death

Terminal illness

Optional riders:
TPD

CI

Premiums waivers

Convertible to Whole lifeTill age 10037 Till age 70
Great EasternDefault:
Death

Terminal illness

Optional riders:
TPD

CI

ECI

Premium waivers

Convertibility optionTill age 65121 Till age 100
NTUC IncomeDefault:
Death

TPD

Terminal illness

Optional riders:
CI

ECI

Daily hospital cash

Premium waivers

 Till age 70– 32 early stage
– 29 intermediate stage
– 39 advanced stage
 Till age last birthday 100
ManulifeDefault:
Death

TPD (not all term plans)

Terminal illness

Optional riders:
CI

Premium waivers

Accident Death

Convertibility optionTill age 7036Quit smoking incentiveTill age 85
PrudentialDefault:
Death

TPD

Terminal illness

Optional riders:
CI

ECI

Option to increase coverage at key milestones

No convertibility option

Till age 70No informationInflation optionTill age 100
Tokio MarineDefault:
Death

Terminal illness

Optional riders:
CI

ECI

Disability rider

Both options availableTill age 8537 early stage
32 intermediate stage
39 advanced stage
Multi-currency option

Minor disability coverage, ⅙ ADLs

Till age 85

Sources: CompareFirst, Advisory firm Ray Alliance financial advisors 

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Key terms used in term 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. Premium term

Referring to the period of which you need to pay your premiums to get covered. Vast majority of term plans require you to pay for as long as your policy term, but AXA Insurance provides a limited pay option. E.g. you could pay the premium for just 20 years and get covered till age 99.

2. Guaranteed renewability and non-guaranteed renewability

The first term refers to policies that will allow you to renew the policy without questions or changes in terms as long as you pay the premiums. Non-guaranteed insurance means the insurer could choose to stop coverage or change coverage terms even if you pay the premiums. The decision lies in both parties. So do look at this clause before you purchase a plan.

3. Decreasing term

This is a form of term insurance and it was designed to cover mortgage loans. As the remaining mortgage loan reduces over time, a decreasing term is used to cover the reducing mortgage sum as its sum assured reduces over time too. Note that the premiums however are not decreasing.

4. Level term

This form of term insurance provides a stable and constant amount of sum assured throughout the period of coverage.

Singaporeans have a life expectancy of 84.8 years.

As you age, the risk of becoming disabled may also increase.

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5. Increasing term

This is the exact opposite of a decreasing term. Designed to help meet increasing insurance needs as inflation and lifestyle needs increase over time. Some policies allow you to add this feature and the sum assured will increase at 3% or at inflation rate each year without additional need to fill in medical questionnaires. Do note that the premiums are increasing.

6. Term to age

This refers to the period of insurance which is set to the insured’s age of choice. A common choice is “term to age 65”, which means the term plan expires when the person reaches age 65. And you will not be able to renew the plan beyond that age. This is decided at the point of purchase.

7. Fixed term

A fixed term insurance sets the period of insurance to the fixed number of years decided at the point of purchase. The premiums will be fixed for the same number of years too. There is usually an additional option for you to renew the insurance after the number of years as well without additional medical underwriting. Upon renewing at the end of the term, new premiums will be calculated based on your older age, which also means it would usually be a lot more expensive.

Who should consider

Those with mortgage loans or other liabilities

Mortgage loans are a good problem, it means you have acquired an asset though you needed some leverage with a loan to make the purchase. When times are good, there should not be a problem with the repayments. Term insurance can help to protect you and your family from huge mortgage loans at cheap premiums.

As loans are generally payable to the maximum of age 65 in Singapore (Banks are not willing to lend beyond that age), that also means that you will not need the coverage beyond age 65. A mortgage term could come in 2 forms, decreasing term and level term (explained above).

For these two reasons, most people will prefer using a term insurance over other forms of life insurance to manage their mortgage risks.

Those with dependents who are financially dependent on them. E.g. kids, parents, siblings.

For those who are supporting their parents financially, and would like to ensure their parents have the same financial support even when you are no longer physically able to earn an income could choose to buy a term insurance to replace the loss of income up till a certain number of years. Similarly, those with young children could do the same.

Those who are on a budget

For those who prefer whole life insurance but cannot squeeze out the budget, they could opt for coverage via a term plan that is much cheaper.

Most term plans come with a guarantee convertible so you could convert to a permanent whole life plan in the future when the budget allows.

Those who are able to invest their money religiously and effectively

Some might have heard the term, “buy term and invest the rest”. That is a strategy where you buy a term plan to protect yourself until your investments reach a point where it matches the sum assured, you can then fully insure yourself. The essence of this has been lost in translation over the years, where people only buy term insurance and not invest the rest.

Read more: How much life insurance do you need? To figure out how much insurance you need.

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