Term insurance is a form of life insurance, which insures against death or terminal illness. As its name suggests, term insurance is only for a fixed term rather than your entire life.
People usually buy term insurance to protect their dependents and loved ones. Should anything happen to you, it guarantees a lump sum payout so that your children will still have money for their expenses and education, and your loved ones may be financially protected from your liabilities.
In fact, you may already have/had basic term life insurance. There is automatic basic life insurance in place for all CPF members and those serving National Service, and you might also find it as part of your employment package.
However, these may not be sufficient coverage, and furthermore, they can expire (for example, once you stop serving NS or leave your job). Opt for a personal life insurance plan for much better financial protection.
Comparison: Whole life vs term insurance
Term insurance is distinct from whole life insurance. Apart from the most obvious factor — the policy term — they are also structured differently and recommended for different purposes.
|Whole life insurance||Term insurance|
|Purpose||Financial protection + savings/investment||Protection only|
|Payment term||Option of limited term (e.g. 20 years) or pay throughout the term||Typically have to pay premiums throughout entire term|
|Policy term||Lasts your whole life||Select your own term e.g. 20 years, or until a certain age|
|Cash value||You can surrender the policy and cash it out||Typically none (no maturity benefit if nothing happens to you during policy term)|
|Policy illustration||(sample illustration)||(sample illustration)|
As you can see, whole life insurance is a ‘bundled’, all-in-one product that protects you with insurance coverage and also functions as a savings/growth instrument. However, the premiums are much more expensive.
Term insurance premiums are much cheaper, but it is purely for protection. There is no (financial) maturity benefit if nothing happens to you during the policy term.
Therefore, those who choose term insurance usually follow the adage ‘buy term and invest the rest’, opting for other financial instruments for the wealth-building component. You can read more about term vs whole life insurance on MoneySense.
How to choose a term insurance policy
Term insurance plans are fairly no-frills, so choosing a plan is somewhat easier than trying to compare whole life policies. Here are the key factors to consider.
Premiums: That is, the price you pay for insurance coverage. This corresponds directly to the sum assured (the payout in case of the insured event, such as death, TPD or critical illness). To start narrowing down the options, you can first obtain premium quotations from the different insurers on the market.
Policy term: Most insurers offer term insurance in standard intervals e.g. 10 years, 20 years. You can also buy policies up to a certain age, e.g. from now up to age 65. The cut-off age varies from insurer to insurer.
Riders: Some term insurance policies offer ‘riders’, e.g. add-on insurance plans, such as personal accident or critical illness plans. (Though not as severe as death or TPD, these scenarios can be just as financially devastating) These expire at the end of your term.
Note that, if you get a payout for one of the riders, your term insurance policy may be terminated as well. To avoid this interference, you can choose to buy your plans separately, or make sure your rider benefits are labelled ‘additional’ rather than ‘accelerated’.
Best term insurance plans in Singapore
To kick off your selection process, we have shortlisted five value-for-money term insurance plans in Singapore. For simplicity’s sake, we will compare protection-only term insurance plans with no cash value, without any riders or add-ons.
|Term insurance plan||Annual premium*||Key benefits|
|FWD Future First||$561||Customised term insurance with suite of non-financial benefits|
|Tokio Marine TM Term Assure (II)||$564||Can convert into whole life or endowment plan before age 60|
|Great Eastern GREAT Term with TPD Benefit||$566||Insures up to age 100; can convert into whole life, universal life, endowment or ILP|
|Etiqa ePROTECT Term Life||$612||Simple, no-frills, easy to buy and manage your policy online|
|AXA Term Protector||$605||Insures up to age 99; offers limited payment term and single premium options|
*Indicative annual premiums generated from CompareFirst.sg, using the following example:
- Age 30, non-smoker, female policyholder (note: premiums cost more for men)
- $1 million sum assured
- Coverage up to age 65 (i.e. 35 years)
FWD Future First
One insurer that’s known for value-for-money plans is FWD. While this insurer is probably better known for lifestyle products such as travel insurance, FWD also offers term life insurance.
Apart from basic term insurance plans that you can purchase directly online, FWD also offers a customised term insurance plan called Future First, which you can only buy through a financial advisor.
This family-centric term insurance policy comes with the option to add on critical illness and/or TPD riders, allows you to increase your coverage at certain key milestones (e.g. having a child), and non-financial benefits including emotional and medical support.
Annual premium: $561 (based on sample profile above, including TPD coverage)
Tokio Marine TM Term Assure (II)
Tokio Marine term insurance is a popular choice as it’s relatively straightforward and very good value for money. It insures against death, TPD and terminal illness.
You can choose terms between 5 years, 10 years, or level all the way up to age 85. There are also a range of riders available, including critical illness, early critical illness, disability insurance and child insurance.
The Tokio Marine term insurance plan is relatively flexible. You can increase your coverage at key milestones (like marriage, parenthood, divorce and property purchase, which increase your liabilities) without requiring further health assessment.
Before the age of 60, you also have the option to convert your term insurance policy into a whole life or endowment plan, up to the coverage amount of your policy.
Annual premium: $564 (based on sample profile above)
Great Eastern GREAT Term
Great Eastern’s GREAT Term insurance, by default, covers death and terminal illness. You can add on riders to cover TPD and 53 critical illnesses. For a fair comparison, our quote includes a TPD benefit.
You can choose a coverage term ranging from 6 years, all the way to age 100. This is the oldest among the insurers featured here.
Similar to the Tokio Marine policy, Great Eastern allows you to convert your term insurance into whole life insurance (or endowment, universal life, or investment-linked insurance plan) without further medical assessment.
Annual premium: $566 (based on sample profile above)
Etiqa ePROTECT Term Life
Etiqa is a digital-focused insurer with very competitive insurance quotations. If you are looking for an affordable, no-frills term insurance plan that you can buy easily online, this is it.
Etiqa ePROTECT Term Life is very simple. Just choose your sum assured ($401,000 up to $2 million) and your desired protection term. You can choose between a 5-year renewable term, 20-year fixed term, or just from now until age 65.
Etiqa covers death, terminal illness and TPD in its basic plan. Optionally, you can add on a critical illness rider (not reflected in the quote below) which protects against 30 key illnesses.
Annual premium: $612 (based on sample profile above)
AXA Term Protector
Among the shortlisted life insurers, AXA offers the most customisation options for its term insurance plan.
You can choose to be covered for a certain number of years (5, 10, 15, 20, 25, or 30 years) or to a certain age (choices are age 50, 55, 60, 65, 70, 75 or 99). The maximum age is 99 years old.
Unlike typical term insurance plans where you need to pay premiums annually, AXA gives you alternatives like limited payment term (15 or 20 years) and even a single lump sum premium (valid for shorter term policies up to 15 years).
The basic plan covers death and terminal illness, and you can add on riders for TPD, disability, personal accident and critical illness.
Annual premium: $605 (based on sample profile above)
Conclusion: Should you get term insurance?
Just like health insurance, life insurance is a must-have, especially if you have dependents.
Even if you do not have dependents, consider the case of a terminal illness or total permanent disability, where you would not be able to support yourself. Without a financial buffer, you might become a monetary burden to your spouse or family.
Make sure you calculate the appropriate insurance coverage (sum assured) for your needs. It should cover your debts (including interest) and be sufficient to replace your income if you have dependents.
Still deciding between term insurance and whole life insurance? It’s a tough one as there are pros and cons.
Term insurance premiums are much cheaper. But make sure you have a plan to grow the money you save on premiums, otherwise, these savings are of little financial benefit to you.
Those who are not keen to manage their own money, you may be better off with a whole life insurance plan after all. You do pay more in premiums, but at least you can get some sort of maturity or cash out benefit later in life.
If undecided, you can choose a term insurance plan that allows you to convert to whole life insurance, so you have options later on.
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