What Is Term Insurance?

As the name, term, suggests, term insurance policy are policies that covers for a period of time (in years). It is a kind of life insurance policy that covers basic sum assured of death and disability benefit.

You may add critical illness insurance and early stage critical illness insurance riders upon them to enhance your coverage.

The difference between term insurance and whole life insurance policies is that for term policies, they do not participate in your insurer’s bonus and therefore, it does not have cash value.

What does that mean?

It just mean that you pay to get yourself covered during this period of time, e.g. 25 years. In between this tenure, if the covered benefit happen (e.g. critical illness), then the life assured will be paid the agreed claim amount.

After the period, the life assured is not covered at all. No money will be given back because there is no cash value at all in the policy.

What Are The Benefits of Purchasing A Term Policy?

There are a few benefits that encourage consumers to purchase a term policy.

They are:

Cost Effective

Term policy tends to be less expensive compared to other life insurance policies as it is straight forward policy that you pay to get yourself covered. If nothing happens or after the tenure, no money is taken back.

High Sum Assured

Most of the insurers in Singapore offers high insurance coverage that covers for e.g. $500,000 or $1,000,000 sum assured at an affordable price.

Due to the increasing affluent in Singapore, policy holders would like to cover higher sum assured to meet with the high financial demands in Singapore. Term policies would be able to do the job.

Buy Term Invest The Rest

Due to the affordability of the policy, consumers believe that you can accumulate your cash value by investing in other financial instruments instead of purchasing a whole life insurance where the cash value is determined by the company’s performance.

Should I Buy Term Insurance Policy?

You should purchase a term insurance policy for the following reasons:

Purchasing a house

Purchasing a property requires a huge financial burden on you and your spouse and therefore, it is highly recommended to purchase a mortgage insurance to cover the outstanding loan amount of your mortgage.

Term insurance policies can be used as a form of mortgage insurance to provide level coverage throughout the whole loan tenure instead of reducing term coverage offered by typical mortgage insurance.

When you start a family 

When starting a family of your own, your financial security is very important to you, your spouse, your parents and your up-coming children.

If you are the sole breadwinner of your family, it is paramount importance to purchase a high sum assured policy to make sure that in the event of death or disability, your dependents do not need to feel the financial burden upon the passing of the sole breadwinner.

When you are having more children

You should always review your financial portfolio with a professional financial planner so that you have sufficient insurance coverage to provide for your family.

An annual or bi-annual financial planning review will allow you to stay on track to make sure that your family is well protected.

When you are buying for your key person in your company

You may use term insurance policy as your key man insurance so that in the event that your company’s key person unexpected leave the company, the policy is able to payout a lump sum to the buy sell agreement. This has to be incorporated with a comprehensive succession planning and estate planning process to before purchasing the term policy.

Conclusion

We believe that term policies is a good policy to be incorporated into your financial portfolio if you would like to meet your medium to long term goals (e.g. having loan of 20 years, a new born that will be independent when he/she turns 20/25 years of age) as it is affordable and offers relatively higher coverage compared to traditional policies.

Want To Know More About Term Insurance?

If you would like to know more about term insurance, you may contact us at (+65) 9380 2839 or you can click on the button below to enquire about the different financial services that we provide.

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About Us

We are a licensed and certified financial planner in Singapore that provides a comprehensive financial planning solutions to meet all your financial and insurance protection needs.

Contact Information

Address: 47 Scotts Road, Goldbell Towers, Singapore 228233

Contact Number: +65 9380 2839 

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