Getting life insurance for the first time?<\/p>\n
It can be overwhelming. All you want is a plan that gives you a financial safety net, but there\u2019s a dizzying array of products in the market and insurance jargon makes you feel like you\u2019re sitting for an exam you didn\u2019t study for.<\/p>\n
Don\u2019t worry. Here\u2019s what you need to know about three common types of life insurance: term life insurance, whole life insurance and investment-linked policies (ILP).<\/p>\n
Term life insurance is a plan that covers you for a specific amount of time (i.e. a \u2018term\u2019). You can pick a term as short as five years, or as long as several decades.<\/p>\n
It\u2019s the most straightforward life insurance policy out of the bunch. You just need to pick a term (e.g. 20 years) and pay the monthly premiums for coverage. You won\u2019t get any cash payout by the end of the term, but if you pass away or experience total permanent disability (TPD) before the term is up, you or your family will get a payout (also known as the \u2018sum assured<\/strong>\u2019).<\/p>\n Term life insurance is relatively affordable<\/strong>. If you are a young adult, it is generally cheaper than whole life insurance and ILP, but your monthly premiums will increase as you age.<\/p>\n Whole life insurance covers you for your entire life (typically until age 100, but you can also choose a shorter term).<\/p>\n It\u2019s more expensive<\/strong> than term life insurance, but your monthly premiums won\u2019t increase with age. Like a term life insurance policy, you (or your beneficiary) will receive the sum assured if you pass away or experience TPD before the term ends.<\/p>\n But here\u2019s where it differs: throughout the policy term, you\u2019ll accumulate a cash value<\/strong>. The premiums of a whole life insurance policy are higher because part of the payment goes to building this cash value. You can withdraw your cash value during your policy term; it will also be paid to you when the policy term ends. This cash value is a guaranteed payment<\/strong>.<\/p>\n There are two types of whole life policies:<\/p>\n Under an investment-linked plan (ILP), part of your premiums will be invested in unit trust funds. You\u2019ll have the flexibility to choose which funds you prefer to invest in.<\/p>\n Like term life or whole life insurance, you (or your beneficiary) will receive the sum assured if you pass away or experience TPD before the policy ends.<\/p>\n Similar to whole life insurance, an ILP has a cash value. You can withdraw your cash value during your policy term, cash it out when your policy ends or use it to pay your premiums. But its cash value is not guaranteed<\/strong>, because it depends on the performance of the unit trust funds you\u2019ve invested in. This means that it can provide a potentially higher cash value than a whole life policy (or potentially lower, if your investments do not perform well).<\/p>\n Here\u2019s a summary of differences:<\/p>\n\n<\/span>What is whole life insurance policy?<\/strong><\/span><\/h2>\n
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<\/span>What is an investment-linked insurance plan?<\/strong><\/span><\/h2>\n
<\/span>Term life insurance vs whole life insurance vs ILP<\/strong><\/span><\/h2>\n