Essential Considerations When Choosing Life Insurance
There are several different types of insurance, and if you download the LIA Guide To Life Insurance you will see Singapore-licenced products described such as Whole of Life, Universal Life and Term Life.
A key feature for international professionals is portability - meaning that once the policy is in place, your coverage will stay in place pretty much wherever you live in the future.
For expatriates and local professionals in Singapore, a common and popular form of life insurance (for insurance not investment purposes) is Term Insurance.
Term insurance pays out a fixed sum on the death of the life assured. A term insurance policy provides life cover for a certain period of time, e.g. 20 years, so long as the premiums are paid regularly (usually monthly or annually).
A term insurance policy for life cover only usually has a fixed premium due, which is guaranteed not to rise in the future as you get older.
A term insurance policy does not accrue any cash-in value. At the expiry date of the policy, or if you stop premiums, the policy will lapse with no value. Hence term insurance can be very cost effective - monthly premiums for term life insurance are typically much lower than other forms of insurance that build up a cash value.
Single Life or Joint Life First Death
Term life insurance is usually available on a ‘Single Life’ or ‘Joint Life First Death’ basis. For Single Life, only one person is insured and the benefits are payable when that person dies. For Joint Life First Death, two lives are insured, and when either of the lives insured dies the insured benefits are payable in full at that time with no further cover remaining.
Ages Of Insured
Life insurance is generally available from the age of adulthood through to either retirement or old age, depending on the coverage terms. Different insurance companies have different age limits, for example some providers allow you to insure lives from the age of 18 and some will allow cover right up until the age of 80.
As we get older, statistically we become more likely to die or become affected by one of a range of diseases and disabilities. For this reason, the price of starting a new life insurance policy rises with age. Starting at age 45 is more expensive than at 35 years, and starting at age 55 is even more so. However, once insurance has been incepted and a policy is in place, there are major benefits.
- The future price stays fixed (i.e. monthly payments do not rise) for the entire duration of the life insurance policy.
- The price for some other types of cover, for example Critical Illness cover, may be changed under strict accordance of the policy terms. However generally this is only possible every five years, and many major insurers have a record of never doing so.
Additionally, any change in the cost of critical illness cover is calculated on the basis of statistics across the insured population, not on your personal situation, and you will be given options to either alter the premium level or adjust the sum assured. As standard, no further medicals are required and you have guaranteed renewability on your policy.
‘Rider’ is the word for an extra feature or cover option that is added on to your insurance policy if you so choose, and on terms as agreed with the insurer.
Common riders for international life insurance in Singapore are:
- Terminal Illness Accelerated Benefit
- TPD - Total and Permanent Disability Benefit
- CIC - Critical Illness Cover
Terminal Illness Accelerated Benefit
Terminal Illness rider is usually a no-charge option on expat life insurance policies. In effect it’s an ‘acceleration’ of the payment of the full amount of the sum assured, if the insured person is diagnosed with an illness that is expected to result in death within twelve months.
Total And Permanent Disability Benefit
Total And Permanent Disability (TPD) is a chargeable optional rider on most international life insurance policies. TPD pays out a lump sum should the life assured become totally and permanently disabled to the extent that he or she cannot work in any occupation. TPD is typically an accelerated benefit in the same way as terminal illness - i.e. the sum paid under a TPD claim is deducted from the remaining life coverage (and it can be the full sum). The purpose of TPD is to provide a cash reserve to mitigate the impact of lost income from employment. Hence TPD is usually only available up until standard retirement age (e.g. 65 years).
TPD is often not too expensive, for instance it may be a relatively small fraction of the overall cost of life insurance. For this reason, if you request a quotation from Singapore-Expat-Life-Insurance.com we will generally provide details for both with and without TPD so that you can compare.
Critical Illness Cover
Critical Illness Cover (CIC) pays out a lump sum if the person insured is diagnosed with one of a defined list of critical illnesses, disablements or medical interventions. These are for example: major cancers, heart attack, coronary artery by-pass surgery, stroke, Parkinson’s disease, and blindness, amongst others.
CIC is not designed specifically to cover costs of medical treatment - that’s the purpose of health insurance. The objective of CIC is to provide a lump sum to soften the financial impact of the life changes that must be made when trying to cope with a major illness. This could be, for example, the cost of changes made to the home or vehicle, the cost of changes to family living arrangements, the cost of an attendent carer and/or housekeeper, a sum to cover lost income, etc.
Note that for expats who are single and have no dependent family, CIC is possibly the most important type of insurance; surviving a critical illness is a major life event and can be very expensive, made harder if family support is not available.
Statistically, we are far more likely to be diagnosed with a critical illness than die during our working lifetime. For this reason, CIC is usually more expensive than TPD, but possibly more essential.
CIC is usually available as an accelerated benefit on a life insurance policy; though a small number of insurers provide CIC as a standalone policy.
Nationality And Country Of Residence
Several insurance companies offer life insurance cover to all the common expatriate nationalities, resident in Singapore. Because this cover is specifically designed for the expat market, your cover stays in place wherever you may move in future (but note there may be some exceptions for war zones, etc.).
Additionally, some insurance providers in Singapore offer life insurance to residents of some other countries that are common expat working destinations, for example in our region Hong Kong, Malaysia, Indonesia, Thailand, Philippines, South Korea, Japan, etc. If you have any questions, please do contact us.
Free Look Period
Under law in Singapore, life insurance companies must offer a ‘Free Look’ period of 14 days. This means that within fourteen days of receiving your policy documents, you have the right to cancel the policy and receive a full refund (less any specific expenses). Some life companies for expats implement a Free Look period of up to 30 days.
Beneficiary Nomination and Trusts
Using a Nomination of Beneficiary declaration you can assign the proceeds of your life insurance to your chosen beneficiary (or beneficiaries). Depending on your nationality and/or future tax regime, there may also be some advantages to use of a trust vehicle.
Implementing these options is generally straightforward, using forms available from the life insurance company. Usually this is free of charge, and can be done at any time during the lifetime of the policy.
Method Of Premium Payment
Most insurance companies in Singapore allow monthly or annual premium payment by interbank Giro or by credit card.
Take care to keep up to date with premiums, to avoid your policy lapsing inadvertently. If you move address or change your credit card details, you should let your insurance company know. You can generally do this via your financial advisor.