What Are Insurance For?

There are a lot of insurance policies out in the market, but do you know what is are the differences? Did you ask your agent what exactly are they selling you, the pros and cons? For layman, it might be difficult for you to understand those insurance terms, but it is important to understand, rather than waiting... Do ask your financial planner more about it, don't be shy.



Let me go through some types of insurances.

1. Traditional Whole Life Insurance Plans

This is a plan that usually has the under-mentioned features:

- usually covers against Death, Total and Permanent Disability (TPD) and the 26 (now change to 30) Critical Illnesses (CI).
- pays a lump sum upon claim and will terminate.
- Premiums to be paid are usually to the age 85 (this may varies) and comes with cash value.
- Some insurance companies offer the options to convert part or full amount of the surrender value to an Annuity Plan.

Note 1: This plan does not cover you against any hospitalization bills.
Note 2: Early termination will result in heavy penalty (getting less than what you have paid)

2. Limited Premium Term Whole Life Insurance Plans

This is a new variation to the Traditional Whole Life Insurance Plan by offering you with a Limited Premium Term.

What does it means?

It means that you do not have to serve the full premium term to 85 years old. You are given some options like 5, 10, 15, 20, 25 and to age 65. The benefits are the same as per the Traditional Whole Life and pays a lump sum upon claim and terminates.

3. Term Insurance

Term Insurance is usually a plan that covers against Death, Total and Permanent Disability and some companies offer the benefit of Terminal Illnesses. No cash value and there’s no penalty for early termination. And there’s also some variations in terms of the maximum coverage age (some to age of 65, 70, 80 as such). Some variations in terms of the premium term, e.g.

Yearly Renewable. You will get to renew the term insurance with each new policy year and premium will increase with age at each renewal.

Renewable every X years. This plan is the same as the above just that the renewable year is set as every X years. Premium will increase by then.

Renewable till age XX. This will cover you till your desired age and will renew by then.

Some variations in term of the structure of the Term Insurance:

Level Term. You will be covered with the same sum assured throughout.
Decreasing Term. Sum assured will decrease by the amount of (Sum Assured / Premium Term)

4. Group Term Insurance

This is another form of Term Insurance but related to those affinity group like e.g. SAF, Public Officer Group, SAFRA, NTUC Union as such. It’s usually tied some form of membership and will terminate upon the cessation of the membership. And also in terms of maximum coverage age, it’s usually lesser than that offered under the usual Term Insurance. Premium is usually tiered by age-group. There’s also no cash value and no penalty for early termination.

Any more insurance i miss out?
Do feel free to drop a comment.