Types of Life Insurance Policies in Singapore

We all have some form of life insurance policies that are being purchased for us or by us during our lifetime. In this article we dive a little deeper on the different types of life insurance policies in Singapore, offering a concise overview to help you better understand the policies you own or consider acquiring.

1. Term Life Insurance

Fixed Level Term Life Insurance: Fixed Level term Provides a fixed death benefit and premium for a specified period, typically 10, 20, or 30 years or till the age of 65/70/75/99. The coverage amount and premium remain unchanged throughout the term. The guaranteed premium does not extend to critical illness riders however, as they are known to be not guaranteed by insurers in the event of high claim volumes within the industry

Renewable Level Term Life Insurance: Renewable term life insurance policy allows the policyholder to renew the coverage at the end of the term without having to undergo a medical examination or provide evidence of insurability. The premiums for renewable term insurance typically increase with each renewal period, reflecting the increased risk associated with the policyholder’s advancing age. There are usually limits to the age of renewability e.g. policy can only be renewable if the life insured is below age 85

Mortgage Reducing Term: Also known as decreasing term insurance, the death benefit decreases over time, typically in line with the outstanding mortgage balance. The premium usually remains level, but the coverage decreases, and they are non-renewable.

Critical Illness (CI) and Disability Income

• Standalone CI: This is a term policy that pays a lump sum benefit once or multiple times if the insured is diagnosed with one or a few of the critical illnesses specified in the policy. The focus of this insurance is the payout on Critical illnesses diagnosis.
• Long Term Care Plans: Long-term care insurance aims to covers costs for services like nursing home care, assisted living, and in-home care, focusing on assistance with activities of daily living (ADLs) such as bathing, dressing, and eating. Benefits (usually in the form of monthly payout) are triggered when the policyholder cannot perform one, two or more ADLs or has severe cognitive impairment, with a waiting period before benefits start.
• Disability Income: Provides a monthly income if the insured becomes disabled and is unable to work. It typically replaces a percentage of the insured’s salary and provides occupation specific coverage.

Read Buy term investment the rest flaw

2. Whole Life Insurance

Par (Participating): Whole life insurance that allows policyholders to participate in the insurance company’s profits through bonuses and/or dividends, which can be used pledge as an asset for financing or accumulate as cash value.

Non-Par (Non-Participating): Whole life insurance that does not pay dividends/bonuses. The premiums and interest are usually fixed and guaranteed.

3. Investment Linked Policies (ILPs)

101 (1-0-1): Refers to a basic structure of an investment-linked policy where the death benefit is the higher of 101% of the policy value or the total premiums paid which is an effective form of protection against the early death of the policy holder and market volatility. This type of plan is typically used to for investment purpose rather than as a proper form of protection.

Traditional ILP: Provides life insurance coverage combined with investment opportunities. The premiums are used to purchase units in investment funds, and the policy value fluctuates with the performance of these funds. Cost of insurance is charged throughout the policy term when there is a sum at risk (Sum assure value – policy value)

Single Premium Protection: A type of ILP where a single lump-sum premium is paid at the outset. It offers life insurance coverage and invests the lump sum in chosen investment funds. Similar to traditional ILP and has a protection rating on an individual life that works like a Universal Life insurance.

4. Universal Life Insurance

VUL (Variable Universal Life): Combines flexible premiums and adjustable coverage with investment options. The policyholder can allocate premiums to a variety of investment accounts, and the policy’s cash value and death benefit can vary based on investment performance.

IUL (Indexed Universal Life): Similar to VUL, but the cash value is tied to the performance of a specific market index, such as the S&P 500. It offers potential for growth with a level of protection against market downturns.

Traditional UL: Offers flexible premiums and death benefits. The cash value earns interest at a rate set by the insurance company, and policyholders can adjust premium payments and death benefits within certain limits.

Read Comprehensive Guide to different types of Universal life in Singapore