Term Life Insurance: How does it work? (Updated 2024)

Term Life Insurance

This article is updated as of 24/10/2024.

Term Life Insurance is a type of life insurance with high health and protection coverage. The default coverage is for Death and Terminal Illness. Coverage comes with a fixed period of tenure ranging from 5, 10, 15, 20,25, 30 to a specified year until the policy expires. The coverage can be enhanced with additional supplementary benefits knows as riders.

Supplementary Benefits (Riders) for Term Life Insurance

To enhance the coverage offered by a Term Life Insurance, riders for additional insurable events can be included in the main Term Life Insurance policy. Such insurable events include:

• Total and Permanent Disability (TPD)
• Early Critical Illness (ECI)
• Critical Illness (CI)
  
  

Note that most Term Life Insurance discontinues upon payout of an insurable event.

Read more: Do I really need Insurance Riders?

Key features of Term Life Insurance 

Lower Premiums

As a Term Life Insurance does not accumulate cash value, hence, the premium amount is generally more affordable. A Term Life Insurance is significantly cheaper than a traditional life policy with cash value. Therefore, if you are looking for protection coverage with limited budget, Term Life Insurance will be suitable for you.

Coverage Booster

Due to life stages or lifestyle changes, one may require additional health and protection coverage only for a specified number of years. These may include scenarios such as:

• Purchase of property
• Parent of a newborn child
• Marriage or divorce
• Graduation
  
  

A Term Life Insurance will be a good and affordable way to boost your coverage for a period of time, eg: for a period of 20 years till your newborn finishes their education and started working. In any case if pre-mature death happens to you within this 20 year period, your child’s education will not be affected.

Options to convert to other life insurance policies

Some of the Insurance Companies may offer an option to convert your term policy to a life insurance such as Whole Life Policy or Investment-Linked Policy without medical underwriting. This is useful for those with a lower initial budget as it can convert into a life insurance when your budget increase.

Get Quote: Term Life Insurance

Read More: 5 Best Term Life Insurance in Singapore (Updated)

High insurance coverage at a low cost

For the same amount of coverage, a life policy that accumulates cash value over time will cost a lot more compared to a Term Life Insurance. Do note that once the coverage period is over, getting a new Term Life Insurance with the same coverage will cost significantly more. This is due to the insurer catering for the additional risk of protecting an older aged individual.

What are some of the Term Life Insurance available?

Without preferences and in no order of ranking, here are some of the popular Term Life Insurance available in Singapore:

Singlife: Elite Term II

HSBC Life: Term Protector

NTUC Income: TermLife Solitaire

FWD: Future First

Etiqa: Essential Term Life Cover

China Taiping: i-Protect

Manulife: ManuProtect Term (II)

Tokio Marine: Term Assure II

China Life: Term Guardian

What should I consider when taking up a Term Life Insurance?

Term Life Insurance premiums are normally cheaper as the plan do not have cash value. However, if you were to surrender a Term Life Insurance, there will be no cash value.  Ensure the Premium Term is within your financial budget, be it monthly or yearly. The Sum Assured or coverage must be sufficient to cover a specific financial goal or objective.

Do also consider the increased cost of getting health and insurance coverage, once the term insurance policy expired.