When we buy life insurance, we should be fully informed of what we’re buying.
That’s because it can make a huge difference to what we end up paying, both in the short and long term in the form of premiums.
So, what are they key types of life insurance we should be aware of? There are pretty much just two.
These are “term life insurance” and “whole life insurance”. But which one is better for you? Let’s find out.
Term life insurance: what to know
Alright so term life insurance does exactly what it says on the tin; it provides you coverage for a certain time period.
This could be five year, 15 years or 25 years. What you decide you need you can tailor it with term life.
So, what are the key benefits of this approach? Firstly, it’s low cost and affordable in terms of the premiums you pay.
Secondly, it provides you flexibility to cancel the policy (and the protection you’d receive) at any time without penalty.
That’s a big plus as your protection needs will likely change and evolve over the course of your 20, 30s, 40s and beyond.
Whole life insurance: what to know
Meanwhile, whole life insurance provides you lifelong coverage. Whole life policies come in two forms.
These are known as participating policies (which have an investment component embedded into them) and non-participating policies (which don’t have any investment component).
Buying whole life insurance also normally means having to meet an insurance agent – which can offer them an opportunity to sell you extra products you don’t need.
Beyond that, though, there are two big downsides to whole life insurance. First, there’s the cost. It’s much more expensive than term life insurance based off the monthly/annual premiums you’ll need to pay.
Second, there isn’t much flexibility. A whole life insurance plan is a long-term commitment and cancelling early can mean you’ll incur a sizeable penalty.
Term life insurance the clear winner
If you’re buying insurance in Singapore (or elsewhere), it’s clear that term life insurance is the best option between the two. That’s down to its low cost and flexibility.
An added bonus is that you can also purchase a term life insurance plan (with decent coverage limits) directly online, without having to interact with an insurance agent.