How to Find the Best Life Insurance

Thinking about life insurance is generally sobering since you are forced to face your own mortality. However, it is a necessary purchase—especially if you have a family who will need financial protection after you're gone. With the amount of life insurance products available selecting the right plan can be an overwhelming task. To help you sift through these policies easier, our guide below details the different types of life insurance policies available in Singapore as well as some things to look out for when selecting your plan.

Different Types of Life Insurance

There are two main types of life insurance: term life insurance and whole life insurance. Term life insurance covers you for death, terminal illness, total and permanent disability and optionally, critical illness for a set number of years. Whole life insurance policies have a fixed premium and will provide lifetime death and permanent disability coverage, accumulate a cash value throughout the lifetime of the policy and offer non-guaranteed bonuses in the event of a payout.

Types of Term Life Insurance

Term life insurance is best for people who have dependents who rely on them for survival for only a limited time. For instance, a working adult who will need to provide for his child until the child becomes financially stable may find this type of life insurance to be valuable. It can also be a good option for those who don't need lifelong coverage and prefer to invest their money in other ways such as a savings bond or stocks. However, you won't receive any payouts if your policy expires before your insured event occurs (i.e. death or permanent disability). There are a few different types of term life insurance in Singapore including Direct Purchase term life insurance, traditional term life insurance and group term insurance.

Direct Purchase Term Life Insurance

Term life insurance plans that fall under the Direct Purchase Insurance (DPI) scheme are affordable term life plans that can be bought directly from the insurer without getting advice from a financial advisor. Fairly standardised in coverage with a maximum death, total and permanent disability and terminal illness coverage amount of S$400,000, they offer three different plan tenures: 5-year renewable, 20-years and up to age 65. Given the standardised set of benefits, consumers should primarily compare their prices and riders available for purchase when shopping around fora DPI term life insurance. Because these plans have a cap of how much coverage you can get, these plans can be good options for people who want low maintenance and affordable coverage as opposed to people who need high levels of coverage.

Traditional Term Life Insurance

Traditional term life insurance policies (i.e. non-DPI or Group) will generally insure you either for a set period of time or will offer a guaranteed renewable policy that will automatically renew every year. Most plans cover at least death, terminal illness and total and permanent disability. They also come with additional features like higher sums assured, various riders like critical illness rider and payor premium waivers compared to a DPI term life policy. In general, we found term life insurance plans to be cheaper than whole life insurance plans, so they can be a good option for those who are not looking to spend extra for savings or endowment plans or, as mentioned earlier, those who need only need protection for mortgages, children's educations and loans for a set period of time. When buying a term life policy, it is recommended that you aim for slightly above your target retirement age to give you a bit of a buffer.

Group Term Life Insurance

There are two types of group term life insurance schemes in Singapore: the Dependants' Protection Scheme (DPS) and the SAF Group Term Life Insurance Scheme.

The DPS is a scheme linked to your CPF and thus provides automatic coverage for Singaporean Citizens or Permanent Residents between the ages of 21 and 60 as soon as they make their first CPF contribution. It covers death, terminal illness and total and permanent disability and has a maximum sum assured of S$46,000. This plan is currently offered through NTUC Income or Great Eastern and you can use your CFO Ordinary or Special accounts to pay for the premiums. It is also an automatic renewal plan, with annual premiums starting at S$36 for persons aged 34 and below to S$260 for persons aged 55-59. Because the amount of coverage is quite low, this plan is best utilised as a supplementary form of coverage on top of other life insurance policies like DPI term life insurance.

AgeAnnual Premiums
34 and lessS$36
35-39S$48
40-44S$84
45-49S$144
50-54S$228
55-59S$260

The SAF Group Term Life Insurance Scheme is a type of group term life insurance for all SAF National Servicemen aged 55 and below. Because it is a Group Policy, it is owned by the government and you do not get a say in how your money will be distributed. Thus, while the S$150,000 of the sum assured can be claimed by the claimant, the rest of the death benefit will be paid according to either Intestate Law or Muslim Intestate Law. This plan is offered by Aviva and provides coverage for death, total and permanent disability and permanent partial dismemberment due to illness or accident.

During your terms of service, you will receive S$150,000 group term life and S$150,000 of group personal accident insurance coverage. The premiums for this plan are paid by MINDEF. You can also purchase coverage for yourself, spouse/children under the Voluntary scheme. Through the Voluntary scheme you can be insured up to S$1,000,000 and your premiums will stay the same until age 65. You will also receive a daily hospital cash benefit, 24/7 worldwide coverage and no medical checkup or underwriting for coverage up to S$250,000. Furthermore, you will also receive discounts for other products such as car, home and travel insurance. This plan can be a good, affordable and comprehensive option for full-time National Servicemen, NSmen, Regulars servicemen (SPF, CNB, ICA, etc.), public officers working with MINDEF or MHA and Volunteers such as those in the SAF Volunteer Corps.

Types of Whole Life Insurance

Whole Life insurance is an insurance scheme that provides lifelong protection for your dependants and comes in three different types: Participating, non-participating and investment-linked policies (ILP's). Whole life insurance policies are generally more expensive than term life insurance policies, although their coverage is also more comprehensive. Furthermore, while whole life insurance will cover you until your death or until you turn 100, you will only need to pay premiums for a set amount of years and you will get your sum assured at the expiry date regardless of whether or not you die.

Participating Whole Life Insurance & Direct Purchase Whole Life Insurance

Participating whole life policies have a cash value and may pay out bonuses depending on the insurer's fund performance. They provide guaranteed death and total and permanent disability coverage and a non-guaranteed bonus or cash dividend. Participating whole life policies also offer miscellaneous benefits such as monthly cash payouts, a payout of a certain percentage (i.e. 200% of the sum assured) and retirement supplemental income. High net worth consumers can find plans that are geared towards multigenerational or multimillion dollar coverage as well.

Direct Purchase Whole life insurance plans are considered to be participating whole life policies since they offer a cash value and a non-guaranteed bonus. However, they have a cap of S$200,000 and don't offer much beyond basic death and total and permanent disability coverage. Similar to Direct Purchase Term Life insurance policies, you can buy them without going through an intermediary either online or through a customer service representative. This can be a good option to consider if you want a cheaper version of a whole life policy and you don't need high coverage and bells & whistles.

Non-Participating Whole Life Insurance

Non-participating whole life policies are policies offering a cash value but no bonus depending on the insurer's investment performance. They are cheaper than participating whole life policies and their premiums are used to pay for insurance costs. This can be a good option to consider if you want lifelong coverage but prefer to invest your money elsewhere.

ILP Whole Life Insurance

ILP's can be a fit for consumers who prefer a life insurance policy with a little bit more risk involved or those who want an investment plan while conveniently getting life protection at the same time. In addition to having the standard life insurance coverage of death and total and permanent disability, you will also have the option of selecting funds. You will pay for units in these funds through a portion of your premiums. You will pay your premium either through a single lump sum payment or regular premium payments on an ongoing basis. Since ILPs are as investments, they are subject to investment risk, meaning you may see inconsistent or even lower than projected returns.

Things to Look Out For

Now that we have a good idea of what kind of options are available to us, we can start parsing out the finer details that can lead us to our ultimate life insurance policy. This can be done in a few ways including understanding your financial needs, comparing quotes, going through the minutiae of insurance policy terminology before finally speaking to a financial advisor.

Your Financial Obligations and Needs

Unlike general insurance policies where the most work you have to do is seeing if the plan fits within your budget, life insurance policies require much more stringent planning. For instance, you will have to find which insurer will provide a plan that best fits within your current and future financial obligations. This means you have to look at your current income, your current debt obligations and mortgages (so as not to pass down these burdens after your death) and your dependant's living expenses. You should also take into consideration how much your financial needs will change in the future. For instance, while you may have less to pay on your mortgage and loans as you age, your life insurance premiums may increase and may become less affordable (this is the case with term life insurance especially). Thus, in addition to looking at your financial needs, you should also compare quotes between insurers to ensure you are getting the best price for your desired coverage.

Definitions & Exclusions

When looking at individual life insurance policies, you should also check the definitions and exclusions. These are minor details that can be easily overlooked, resulting in gaps of coverage. For instance, you should look at how each insurer defines your age. If the insurer defines your age as "age next birthday" you may end up getting a year's less worth of coverage than an insurer who defines age as "age last birthday" or "age closest to birthday". Furthermore, it is also important to check when certain benefits come into play. For example, in most policies suicide isn't covered under your death benefit before one year of your policy.

Speaking to a Financial Advisor

Unless you are opting for a Direct Purchase Insurance policy, you will have to discuss your life insurance plans with a financial advisor. They will go through your financial history and future goals with you to assess the kind of plan that will best benefit you and your dependents. Not only are they knowledgeable about the products and have experience matching consumers to life insurance products, but in most cases you won't able to get a life insurance policy without speaking with one in the first place. However, you should make sure your financial advisor is able to address all your concerns and does not try to intimidate you into purchasing any particular policy.

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