Term Life Policy
Term insurance is a form of life insurance that insures against death or terminal illness for a fixed term as compared to Whole Life insurance that covers you for your entire life.
3 key features of Term Life Policy
Coverage for a specific period of time
Term life insurance covers you for a fixed period of time (also why it’s named term) – mostly until 75 years old. That means, if you are diagnosed with terminal illness, total permanent disability, or pass away before 75 years old, your family will receive the lump sum you were insured for.
Payouts only upon death or total and permanent disability
If the insured dies or experiences total permanent disability during the policy tenure, a lump sum or monthly payout equivalent to the sum assured is paid to the nominee. There will be no payouts once the policy matures.
An affordable policy that can be renewed, or converted
Yearly renewal premiums may not be guaranteed. There will be conditions before conversion to another type of product (e.g. whole life, endowment or investment-linked) is allowed.
Coverage for a specific period of time
Term life insurance covers you for a fixed period of time (also why it’s named term) – mostly until 75 years old. That means, if you are diagnosed with terminal illness, total permanent disability, or pass away before 75 years old, your family will receive the lump sum you were insured for.
Payouts only upon death or total and permanent disability
If the insured dies or experiences total permanent disability during the policy tenure, a lump sum or monthly payout equivalent to the sum assured is paid to the nominee. There will be no payouts once the policy matures.
An affordable policy that can be renewed, or converted
Yearly renewal premiums may not be guaranteed. There will be conditions before conversion to another type of product (e.g. whole life, endowment or investment-linked) is allowed.
What are the differences between Term Life Policy and Whole Life Policy?
The following table illustrates the similarities and differences between Term Life Policy and Whole Life Policy.
| Term Life Policy | Whole Life Policy | |
|---|---|---|
| What is the purpose? | Protection against illness or accidents | Protection + potential to grow savings |
| What is the coverage? | Most plans cover death and total permanent disability (TPD). Option to add on Riders (i.e. Critical Illness Rider) | Most plans cover death and total permanent disability (TPD). Option to add on Riders (i.e. Critical Illness Rider) |
| What is the coverage period? | Up to a specific period (e.g. 5 years) or up to a specific age (varies across insurers but typically covers till 65 or older) | Usually up to end of life |
| How long do you have to pay for it? | Throughout the coverage period | Limited payment periods of 10, 15, 20 or 25 years |
| What are the surrender terms and benefits? | Coverage ends + no payout | Cash value (guaranteed + non-guaranteed bonuses if any) |
| Which policy type is more affordable? | More affordable than Whole Life but no surrender cash value | More expensive than Term Life as it provides some cash value amount which you can borrow/withdraw against |
| What are the death benefits? | Sum assured (if occurred within coverage period) | Sum assured + accumulated bonuses if any |
Top benefits of having a Term Life Policy
- Affordable: One of the most affordable types of insurance policies to have.
- Simple to understand: Pay your insurance premiums, and receive payouts in the event of death or a permanent disability or terminal illness. So simple!
- Fixed period of time: The policy provides coverage for a specific period of your life.
Make sure you also read about the Whole Life policy. Click the link below!
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