Tuesday, November 2, 2010

Singapore Term Insurance FAQs

Singapore Term Insurance 

Frequently Asked Questions

1. What is Term Insurance?



  • At its most basic form, a Term Insurance policy is one where you pay only for insurance cover with no accumulation of cash value
  • Term insurance comes with a fixed policy term, where the number of years of cover is specified. Insurance proceeds will only be paid out if an event that is covered under the policy happens during the policy term. Nothing is paid out if the life assured survives the specified policy term or if an event that is covered happens after the specified policy term.


2. How does the cost of Term Insurance compare with other types of Insurance products? 

  • As term insurance comes with policy term that is specified and does not accumulate cash value, it is usually the cheapest compared to other types of insurance policies which accumulate cash value such as Endowment, Whole-Life or Investment-Linked insurance policies for the same sum assured (insurance cover).



3. What are the different periods of cover available for Term Insurance?


  • Term insurance generally specifies to what age a person can be covered, eg. 60 years old
  • Before this specified age, there are usually two options
    • Fixed Policy Term: Where the number of years to be covered for is specified (eg. 10 years or 30 years) subject to the maximum cover age and the maximum policy term of cover available for the policy. After the policy term, coverage ceases.
    • Renewable Policy Term: Generally in 5-year term or in some cases, 1-year term. The policy is automatically renewed at the end of the term with the same coverage subject to the maximum cover age. Premiums usually increase upon renewals.



4. Does term insurance pay any cash value or maturity benefits?
  • No cash value or maturity benefits. Refer to Question 2.





5. What kind of insurance coverage does Term Insurance provide?
  • Term Insurance usually comes with Death and Total & Permanent Disability benefits. Depending on insurance companies and the specific term insurance product, riders may be added on to the main plan such as Terminal Illness Benefit, Critical Illness Benefit and Personal Accident Cover.


6. What are the disadvantages of Term Insurance?

  • As Term Insurance do not accumulate cash values, the sum assured stays the same and will not be able to take into account inflation.
  • With a fixed policy term cover, there may also be the risk of the policy term expiring when you continue to need the protection cover.


7. What happens if I miss my premium payment for Term Insurance?
  • Typically there is a 30 day-grace period from the premium due date to make your premium payment. However, unlike policies with cash values accumulated, a Term Insurance policy will lapse once the grace period is over as there are no cash values accumulated for the payment of premiums through deduction of the cash values.
Have a question on Term Insurance which is not answered here? 

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