Term life or whole life insurance – your choice!
Make an informed decision with an understanding of the differences between term and whole life plan.
When it comes to deciding how insurance can meet your protection needs to support unforeseen life events, most will start with the commonly known whole life insurance and term life insurance plans.
While both can provide protection against death, total and permanent disability, terminal illness or critical illness, they differ in various aspects. Understanding the differences would thus help you make an informed decision on the most suitable plan.
Here’s a quick overview of the two life insurance plans:
|Whole life insurance plan
|Term life insurance plan
|Protection + Savings
|Choice of coverage spanning over a specific term period or up to a specific age
|Costs more as the coverage term is longer plus there are savings and investment features
|More affordable as the coverage term is shorter and does not have savings element and investment features
|Premium payment term
|Over a lifetime or fixed number of years
|Over the coverage period or fixed number of years
|Coverage ends at point of surrender. There may be cash value when you surrender the policy
|Coverage ends at point of surrender and there is no cash value when you surrender the policy
For both whole life insurance plans and term life insurance plans, you can also add riders for additional protection, such as coverage for critical illness and total and permanent disability.
Duration of coverage
A whole life insurance plan (whole life plan) covers you for, as the name suggests, your entire lifetime.
On the other hand, a term life insurance plan (term life plan) covers you for a specific period of time. For example, the term of coverage may start from 6 years, or up to the age of 100.
If someone insured under a term life plan passes away within that set period, the beneficiaries of the plan will receive a one-time payout of the coverage, providing them the financial means for their daily needs such as funding a university education for the children or providing a stable financial pillar for the surviving spouse.
The premium for a whole life plan is generally higher than a term life plan, with the same amount of coverage. This is because it provides longer coverage and builds cash value over time.
In comparison, premiums for a term life plan are less expensive as it does not have a savings element. For the young and healthy, this is the most cost-effective way to get high coverage at a relatively lower cost.
Cash value from the plan
Cash value is one of the features that differentiate the whole life plan from the term life plan, which does not provide any cash value when your coverage ends.
The difference in premiums between the two plans is what allows the insurer to pool premiums in a participating fund which is re-invested to generate cash value for you when you take up a whole life plan. This feature of the whole life plan allows you to enjoy protection and accumulate cash value at the same time.
If having such feature is important to you, one of the whole life plans you can consider is Great Eastern’s GREAT Flexi Protect Series, which offers three whole life participating plans with different coverages. It also gives you the flexibility to choose from three optional riders that provide coverage for death, total and permanent disability, terminal illness and choice of critical illness at the early and intermediate stages, and/or critical stage with additional benefits, for enhanced and multiplied coverage.
Why would term life plans work out for many?
Term life plans may seem to be an ideal option for most young people who just started their career and have budget constraints or young parents who typically already have a lot of financial obligations on their plate, as term life plans are a more budget-friendly and cost-effective choice than a whole life plan.
A term life plan also provides extra protection on top of any existing whole life plans you may have, and lets you adjust to your ever-changing life circumstances. For example, you can purchase a term life plan to increase your coverage over a particular set period within which you foresee yourself requiring extra protection, such as when you have another child on the way.
For those under the Dependants' Protection Scheme (DPS), you can enhance your term life coverage with GoGreat Term Life that allows you to boost up to S$300,000 coverage with one of the lowest premium rates in Singapore. Get all-round protection till age 65 with highly affordable premiums from just S$0.211 a day.
Consider which plans work best for you
Applying for a term life plan is usually simple, and online application is usually fast, which is a great thing for young people who often juggle tight schedules between work, family and life.
Nowadays you can apply for a term life plan via online application, which is usually simple and fast. It’s great for young people and family, who often juggle tight schedules between work, family and life.
GoGreat Term Life allows you to boost and secure your coverage for death, terminal illness and total permanent disability for up to S$300,000 with no medical check-up required. Simply purchase it online by answering a few health related questions.
Find out how much you’ll need to increase your coverage with GoGreat Term life here.
If you are looking for coverage higher than S$300,000 or considering critical illness or health coverage, click here to let us call you back to assist with a financial review.
Other unique considerations specific to your family’s circumstances are also important. For example, if you have a loved ones living with a disability and you wish to ensure his/her financial needs are taken care of when you are not around, you can consider a whole life plan which provides you a lifetime protection against death, as opposed to term life insurance which is for a specific number of years.
At the end of the day, everyone’s circumstances are different, and you will have to consider your own financial means and life needs to decide what coverage is suitable for you.
1Daily rate is based on life assured's age at 34 and below with a sum assured of S$300,000, divided by 365 days. At each policy renewal, your premiums will be based on your attained age. The premiums may be adjusted according to future experience.
This advertisement has not been reviewed by the Monetary Authority of Singapore.
As buying a life insurance policy is a long-term commitment, an early termination of the policy usually involves high costs and the surrender value, if any, that is payable to you may be zero or less than the total premiums paid.
The information presented is for general information only and does not have regard to the specific investment objectives, financial situation or particular needs of any particular person.
As GoGreat Term Life has no savings or investment feature, there is no cash value if the policy ends or is terminated prematurely.
You may wish to seek advice from a financial adviser before making a commitment to purchase this product. If you choose not to seek advice from a financial adviser, you should consider whether this product is suitable for you.
These policies are protected under the Policy Owners’ Protection Scheme which is administered by the Singapore Deposit Insurance Corporation (SDIC). Coverage for your policy is automatic and no further action is required from you. For more information on the types of benefits that are covered under the scheme as well as the limits of coverage, where applicable, please contact us or visit the Life Insurance Association (LIA) or SDIC websites (www.lia.org.sg or www.sdic.org.sg).
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