Buying a term life insurance can be a daunting process, with the myriad of choices available. Contrary to paying for traditional life insurance policy, term life offers lower premium payable for the term of the insurance and greater flexibility.
The premium duration differs from yearly renewal, to fixed years depending on how the insurance company allocates. Generally, the yearly renewal policy will cost the least, as the insurer’s health condition may deteriorate over time and premium will most likely rise.
If Jon buys an FWD Term Life Plus policy with yearly renewals, it will cost $8.35/month. If he chooses to apply for a fixed term of 5 years, the premium payable will be $8.54/month. This works out to a difference of $11.40, assuming that the yearly renewal premium does not change for 5 years. This is often not the case as the premium will get more expensive as Jon gets older. Thus, the longer the duration, the more expensive it is to get a yearly renewing policy.
If I were to decide on what I should buy, there would be a few considerations to think about. If I am a student without a stable income, I will consider buying a term life that renews yearly. Once I graduate and start working, I would consider upgrading to a longer fixed term policy.
|Company||Yearly Renewal||Fixed Renewal (5 years)||Fixed Renewal (10 years)||Till Retirement Age|
|FWD: Term Life Plus||$8.35||$8.54||$12.66||$22.49 (36 years, reaching age 66 for Jon)|
|AIA: Direct-AIA Term Cover||-||$9.57||-||$27.45 (till age 65)|
|Great Eastern: Great Term||-||-||$12.60||$29.75 (till age 66)|
What are my choices?
When choosing a term life insurance, newer companies like FWD and Singlife offer policies with competitive pricing, especially with Singlife’s yearly renewal plan as low as $7.30 for Jon. Larger incumbents like AIA or Great Eastern do not have many offerings in this segment of the market.
However, as you mature and become more financially stable, your options open up. Longer premiums should be your consideration as age and health conditions will increase the premium prices. The more affordable plans like the FWD plan are spartan and do not offer certain coverage like total permanent disability or critical illness. These coverages can be added to the basic plan with an additional cost on top.
The premium for FWD is still lower with the riders added, but there are coverages that are not included like terminal illness or living care, which is included in Great Eastern’s plans. For those purchasing critical illness riders, Great Eastern covers 37 critical illnesses, while FWD and AIA cover only 35 and 30 respectively.
Incumbents like the AIA or Great Eastern are simpler to choose, having a set age where the policy expires. FWD offers a different model, where you select the number of years for your fixed term, ranging from 5 to 47 years.
For those who are worried about the premium expiring before any major issues, they could opt for Great Eastern’s plan, which offers expiry after the insurer crosses the age of 100 years old. However, If you are looking for a plan of such length, you might want to consider getting normal life insurance instead.
It is worth noting that when buying term life insurance, lump sum payment often will lead to some form of discounts. For example, the FWD Term Life Plus yearly renewal cost $8.35/month, but $95.20 yearly. The yearly payment cost $5 less in total as compared to the monthly payment. Furthermore, if you can find discount codes for AIA, Great Eastern, Singlife or FWD, it will help in reducing the premium amount payable.
Health status is also a factor to consider. FWD offers no health declaration if you are non-smoker under the age of 30 and in the pink of health. AIA guarantees renewal for the 5-year term regardless of health condition.
In conclusion, FWD offers the best policy overall, especially for the younger crowds. However, if you are concerned about having more coverage or wish to buy through an agent, AIA and Great Eastern may be a better choice for you. Make sure to know what special requirements you need, like more critical illness coverage, longer policy duration or no health declaration.