(All About Life Insurance Related – Whole Life, Term and Group Term)
This post and the continuous ones will form the basis of all the past and current insurance plans out in the market and I hope this will give you a better understanding of the structure of plans that you may have in your current portfolio.
Note: there are many different variations of plans and if you do not see it, it would be best to seek your Financial Planner with regards to it. It’s better to understand now then to have issues (in terms of claiming or maturity). Do not be shy about asking! Thanks!
Here Goes The List:
1. Traditional Whole Life Insurance Plans
This is a plan that usually covers against Death, Total and Permanent Disability (TPD) and the 26 (now change to 30) Critical Illnesses (CI). This plan 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. Do note that this plan does not cover you against any hospitalization bills. Also note that 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. This 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.
5. Dependant Protection Scheme.
A scheme devised by the CPF Board which will auto-enroll you in upon age 16 (if there’s monies in the CPF account) to maximum age of 60. No renewability beyond age 60. Premium is deducted through your CPF-OA account and tiered to an age-group. This plan covers one against Death and Permanent Incapacitation for sum assured of $46,000 and .
Know Your Insurance Term Definition
Lastly before I end off this post, with regards to the benefits being offered like Death, TPD, 30 CI, Permanent Incapacitation and such – this is crucial to your understanding in terms of what does this mean for each benefit. When there’s any claims, Insurance Companies will follow the definition listed in your contract. If your claim nature does not fall within the definition, Insurance Companies do have the rights to void the claims.
I know this may sound unfair but Insurance Companies have the right to protect the interest of other policyholders as claims will add on to claims experience and may increase premiums in the long run.
Do you think I have left out any other kind of Life Insurance Related – Whole Life, Term, Group Term? If yes, please do post your comment below: