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Term vs. Whole Life Insurance: Which Is the Best Option for Young Singaporeans?

If you’re a young Singapore citizen or resident who’s just kickstarted your career, one of the first things you may find yourself worrying about is insurance. At this point in time, a number of your peers may also be considering insurance, or they may already have insurance policies under their name. This begs the question: if you do get insurance coverage for yourself, what type should it be? How do you choose between term insurance vs life insurance, which are two of the most popular types out there? And once you’ve arrived at the right type of insurance to get, what qualities should you look for from your provider?

You can start by learning about what term and whole life insurance have in common. Both will put you in a legally binding contract with your insurance provider where they’ll pay an agreed-upon amount to your beneficiaries upon your death. The same applies to both types of insurance if you contract a terminal illness. The payouts will be derived from the premiums you pay to your insurer, either upfront or on a monthly basis.

Some insurance programs also have provisions in the case that you contract a critical illness or become permanently disabled. But these provisions are not automatically included, and you will have to ask your carrier if they’re part of your coverage.

Now that you know the basic facts about term insurance and whole life insurance, it’s time for you to compare the two. Here’s a briefer on each of them, as well as some tips on how to choose the right insurance program for yourself.

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What Does Term Insurance Entail?

Term insurance is a type of insurance coverage that only applies for a limited period. The term can encapsulate a certain number of years, for example three years or five years. That means that you’ll only be protected by your insurance over the duration of those years. Other term insurance products will only protect you up to a certain age, like when you turn 65 or 75 years old.

The good thing about term insurance is that it’s the more affordable option by far compared to whole life insurance. You will only need to pay premiums until the term expires. That makes it a straightforward and no-nonsense type of insurance coverage that you can buy whenever you feel you need it the most. The trade-off, however, is that term insurance has no cash value. Say that nothing untoward happens to you from the time that you purchase the insurance coverage to the time it expires. Unlike with whole life insurance, you won’t be able to cash out on any additional financial benefits or perks when the term is over. In summary, term insurance is the best kind to get if you want the protections for a certain number of years, and nothing more. 

What Are Whole Life Insurance Programs Like?

As opposed to term insurance, whole life insurance guarantees protection up until the end of one’s life, or at a maximum age of 99. The premiums on this kind of insurance can be paid in advance as well as on a regular basis.

Whole life insurance is admittedly rather expensive, especially for younger income earners who don’t have established careers yet. Enrolment for this kind of program can cost up to 10 or even 20 times the cost of basic term insurance. But it comes with the added perk of a cash payout in case you need one in your lifetime. If you opt out of the whole life insurance program early, you may be able to redeem the policy’s cash value. That’s because your life insurance will be coupled with other financial instruments that can generate additional profit. If you want more than just the protections—namely, the opportunity to build your savings and start investing—whole life insurance is worth the cost.

How Should You Choose Between Term and Whole Life Insurance?

Hopefully, the information above has helped you distinguish between term and whole life insurance. But here are some additional pointers for narrowing your options down further and finding the ideal insurance program for you. 

  • Choose the type of insurance coverage that you can afford. Don’t spend more on insurance than you’re capable of.

  • Choose the coverage that you can pay for in the most flexible terms. Whole life insurance may be expensive, but it’s also easier to settle the premium payments over a shorter period of time. When you’ve paid it off, you can enjoy lifelong coverage for the rest of your years. Term insurance, on the other hand, is more like an annual subscription. It may be easier to pay now, but it will get harder as you grow older and your health and income situation aren’t as assured.

  • Check out different programs offered by different providers. Don’t settle on the first insurance programs advertised to you. For term insurance, you can find policies that are as long or as short as you prefer them to be. For whole life insurance, you can determine how extensive you want the investment components to be.

  • Lastly, choose the coverage that matches where you are in life. Neither term insurance nor whole life insurance are inherently superior to the other. But the right type of insurance to get may depend on factors like your current income, the number of people you’re supporting, and the like. 

Today, you may be in the peak of your health, and life in general may seem stable and promising. But it won’t be like that as the years wear on. That’s when your insurance coverage may come into play. This is a good time to explore your options and to sign up for policies that make sense to you. Best of luck, and may your insurance policy be the most responsive it can be to your needs!