The Ultimate Guide to Whole Life Insurance in Singapore

Are you planning to buy life insurance in Singapore? That’s great news! You’ll never know when an accident or death knocks on the door, so an insurance plan is definitely the best defence you could get.

There are many types of life insurance policies to protect your loved ones when you pass away or become permanently disabled due to an accident. Whole life insurance is the most widely acquired insurance because it provides protection during the entire lifetime, not just for a specific time.

If you’re not sure whether a whole life policy is a perfect choice for you, carry on reading. But first, let’s talk about the basic insurance terms that you should know.

Understanding the Basic Insurance Terms

  1. Policyholder – also called policy owner, is the individual who owns an insurance policy and pays the premium (see #3). The policy owner may not always be the same person as the life assured (see #5).
  2. Policy tenure – refers to the duration for which the policy remains in force. In whole life insurance policies, the life coverage is until the life assured is alive.
  3. Premium – is the amount paid to keep the life insurance plan active. If the premium isn’t paid before the due date or is past the grace period (see #12), the policy terminates.
  4. Cash value – is the portion of a policy that earns a rate of interest. The policyholder can withdraw a cash amount in case of an emergency.
  5. Life assured – refers to the individual for whom the life insurance plan is purchased to cover the risk of untimely death.
  6. Sum assured – is the amount of money the insurance company agrees to pay when an insured event happens.
  7. Death benefit – is the face amount paid out to the designated beneficiary(s) when the life assured dies during the policy tenure.
  8. Riders – are optional benefits that can be added to a policy to provide extended life insurance coverage.
  9. Nominee – also known as the beneficiary, refers to the person who receives the life insurance pay-outs and other benefits when an unfortunate event occurs.
  10. Irrevocable beneficiary – is a beneficiary designation whose name can’t be removed from a life insurance policy without their consent.
  11. Maturity age – is the age of the life assured at which the policy ends or terminates.
  12. Grace period – is a defined amount of time after the premium is due. In whole life insurance, the grace period would only be effective if there was no remaining cash value in the policy and the premium payment was due.

Is Whole Life Insurance the Right Plan for You?

When you choose to buy whole life insurance in Singapore, you will not worry about your insurance protection expiring. It’s not like term life insurance that expires whenever your selected term is over, and has to be renewed to extend the coverage.

Here are a few questions that can help you decide if whole life insurance is the right plan for you.

Read on to find out how you can benefit from a life insurance policy.

4 Benefits of Getting Whole Life Insurance

1. Permanent & Lifelong Protection

By the name itself, whole life insurance has you covered for a lifetime. It doesn’t expire, which means your coverage also doesn’t end. You will enjoy the same protection after 10, 20, or 30 years and the policy remains intact regardless of how many times you change jobs, get sick, or hospitalised.

However, you can only reap lifelong financial protection as long as the premiums are paid on a predetermined schedule. If you miss a life insurance payment and the cash value isn’t sufficient to provide a benefit for your whole life, your policy will lapse, and your coverage will end.

2. Fixed or Locked-in Premium

Did the instance we mentioned about missed insurance premiums scare you? Here’s the good news: the premium for whole life policies are locked in for life and will never increase.

Whole life insurance is payable for a specific length of time. Some policies are paid up until age 99 or 100, while others only have a tenure of 10, 15, 20 or 30 years. The latter, however, come with higher insurance premiums.

In short, your policy’s premium will remain as-is, and you can enjoy peace of mind with lifetime protection coverage. You can depend on a guaranteed amount that stays in place for your entire life (see benefit #3).

3. Guaranteed Death Benefit

When you buy a whole life insurance plan, you’re not only locked into a fixed premium but also with a set death benefit amount. The insurance policy promises to provide a cash benefit as a lump-sum payment paid out to your beneficiary or beneficiaries immediately after your death.

As a policyholder, you may specify whether your beneficiary will get the money in full or just half of it immediately after your death and receive the other half a year after the date of death.

Here’s even better news: your designated beneficiary will receive the chunk of cash, tax-free! The reason being is that the death benefit isn’t counted as taxable income, and the beneficiary doesn’t have to pay for taxes.

4. Accumulate Cash Value

What also sets apart whole life insurance from term insurance is the cash value component. Unlike term policies, whole life policies have a savings portion that may accumulate and earn more interest over the years.

Whole life plans provide guaranteed cash value accounts that grow according to a formula the insurance company determines. You can also access the cash value of your policy, either withdraw or make a loan.

If you take out a life insurance loan, you can make periodic payments with annual interest. If you wish to make a withdrawal, you can only withdraw up to the amount you have already paid in premiums. Note that withdrawing beyond the amount paid in premiums typically is taxable.

Final Thoughts

Whole life insurance is one of the greatest things you can give to yourself or your loved ones. Nobody knows when adversaries will happen, like death or accident, so it’s better to be prepared.

The good news is that there are many life insurance companies in Singapore. What you need to do on your part is research the company, assess your needs and explore a wealth of insurance plan options.

Related: IS CELL PHONE INSURANCE WORTH IT OR JUST A TOP TRIER?

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