In this month’s Ask Me Anything, we answer all your term life insurance-related questions – from how to choose to the different types available.
Question: Is term insurance offered by different insurance companies the same? What should we look out for when purchasing term Insurance?
Term insurance is a non-participating pure insurance plan with no cash value, it protects against various detrimental situations like death, terminal illness, critical Illness and total permanent disability. Term insurance offered by different insurance companies are not the same, therefore it is always good to know what your protection needs are before deciding on one that best fits you.
There are a few considerations we should look out for when purchasing term insurance. They are premium paying period, coverage amount and coverage period. There is also renewable term insurance that is applicable to policy terms of 5 years and 10 years only. The premiums payable for renewable term insurance will be calculated based on the life assureds’ age at date of renewal.
– Client Adviser Norris
Question: Are there different categories and considerations to be mindful of for term plan?
Term insurance can be fixed or decreasing coverage. There is also term insurance which essentially covers critical illness, multiple claims for critical illness, etc. Not all term insurance offers the same policy tenure or can add optional riders (such as waiver of premium in the event of a critical illness). It is therefore important to be clear of the insured events required.
Other features include convertibility (for example, if there is an intention to convert to a whole life plan), renewability (if unsure of the policy tenure required), etc.
The type of term insurance, riders required, sum assured, policy tenure, etc, depends on the individual’s needs, objectives, circumstances, etc. Based on the individual’s requirements, comparison can be done to assess which term insurance is more cost-efficient.
– Client Adviser Sijin
Questions: I have an existing medical condition. Am I eligible to purchase a term plan?
Yes, you are still eligible to purchase a term plan. After which, the underwriter will process the application and provide you with an outcome regarding the coverage and premiums.
Applications for term insurance can result in acceptance, exclusion of condition/s, premium loading, postpone of the application, or decline of the application.
– Client Adviser Terence
Question: Can I buy term insurance as a legacy plan to pass my wealth on to my children?
The purpose of legacy planning is the act of passing your assets to the people you care about. It doesn’t have to be monetary per se, but it’s the value system that you live by and the memories that you leave behind. So yes, term insurance can be dedicated as a tool for legacy planning. In fact, it is the simplest and purest form of life insurance. Not only does it provide financial protection for your family even when you’re no longer around, but you can also get a large amount of life cover (i.e. sum assured) at a relatively low premium rate. However, as the term plan has a limited policy duration, there is the risk of outliving the duration term and not receiving the payout.
Term insurance is not the only tool to pass on one’s wealth. There are other tools like universal life, whole life or even an endowment plan. Universal life offers long-term protection while leaving a substantial inheritance upon death. Whole life caters to lifelong coverage and comes with a cash value component that grows over time. Endowment insurance is designed to accumulate and pay a lump sum after a specific term. Ultimately, there is no one tool that fits all. Each tool has its designated purpose. It is how we utilise these tools that best fits our objective, legacy planning.”
– Client Adviser Chee Ping
Have a question of your own? Write in to firstname.lastname@example.org and look out for our client advisers’ responses in upcoming months. We also have a live AMA session on Instagram – so follow us now for more updates!