Term Insurance
If you have a family that is dependent on you and you are the main breadwinner, you should definitely consider some form of life insurance and term insurance is one of the options available to you. Life insurance is becoming increasingly popular in Singapore and you have the choice of over 140 insurance companies some of whom are dedicated life insurance companies. Ever since the government of Singapore opened private life insurance to foreign participation in the year 2000, the number of insurers operating in Singapore has multiplied. The type of life insurance that you will choose will depend on your objectives but the most common reason for taking out life insurance is to protect your family against the consequences of your death. You can also take out life insurance for savings and investment in addition to coverage for death.
The cost of life insurance depends on a number of factors such as the type of coverage that you choose, your age and gender and the state of your health. If you are old or unhealthy, you would need to pay more in terms of premiums. The premium is calculated by the insurance company on the risk and the likelihood of your death. If you have a limited amount of money to spend on insurance, you should seriously consider term insurance which is cheaper than whole life insurance. Term insurance coverage is only valid for a fixed period of time and can be considered as temporary insurance. It fulfils your requirement that your family is financially taking care of should you die prematurely.
The first category of term insurance is what is called Basic term life insurance and covers death only. In addition to death, many insurers in Singapore are now beginning to offer protection against permanent disability as well. If you were to suffer death or disability while the policy is in force, your family will receive a lump sum payment but no benefits will be received once the policy expires… In Singapore, term insurance is typically available for a period ranging from five years to 30 years. Normally, the premium is payable at a flat and guaranteed rate on a monthly basis.
This kind of insurance makes sense if:
- You are the main income earner for the family and wish to protect your family from financial problems in the event of your premature death
- You have a limited amount of money to spend on insurance premiums
The other category of term insurance is called endowment life insurance. This combines the features of a term life policy and a long-term savings account. An endowment policy in Singapore has a specific maturity date and provides steady returns and a growth in value besides paying out a lump sum in the event of the death of the insured during the term of the policy. You can expect to receive higher interest rates than banks pay out on long term deposits. These policies are available with profits (in which case you are entitled to a share of the profits every year) or without profits.
You should choose an endowment policy which is more expensive than the basic term policy if:
- You want to build long-term savings for purposes such as retirement or the education of your children
- You want to protect your family in the case of your premature death.
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