Frequently Asked Questions
To determine the amount of coverage that would be adequate for your needs, it is recommended that you get your Financial Adviser (FA) representative to perform a thorough fact-find. This process takes into account the amount required to cover your protection needs, replace your income, cover education funding for your children, settle outstanding liabilities such as mortgages and provide for those should the unexpected happen.
Based on this analysis, your FA representative will be able to determine the product that will best meet your needs, means and goals and at the same time ensure that you are getting adequate insurance coverage to cover the needs of your dependants.
Typically, you should aim to have approximately 9-10 times your annual earnings as basic life cover, although this would vary from person to person.
Your FA representative will be best placed to perform a thorough fact-find to evaluate your protection needs.
In purchasing an insurance policy, you should give due consideration to your need for protection. However, as everyone’s needs and financial circumstances are different, and they change over life’s cycles, there is no rule of thumb that can tell you exactly what products to buy.
That is why you should seek advice from FA representatives who will undertake a fact-find with you to evaluate your needs and then make the appropriate recommendations. Based on his analysis, he will be able to identify where your gaps are before making his recommendations.
In most situations, it is not advisable to terminate or replace any in-force policy as you may incur new fees and charges. There are also other factors that discourage a replacement of policy. For example, if your health status has deteriorated over the years, and this will result in you paying higher premiums or you being excluded for certain cover, should you get a new policy that offers similar benefits to your previous one.
Rather than replacing an existing policy, you can consider attaching policy riders to enhance your insurance plan. A ‘rider’ is a modification to an existing insurance policy that provides additional coverage and benefits. For example, you could take a rider that offers a disability waiver of premium, which allows you to stop paying premiums for a policy if you become disabled for a sustained period of time. Or you could take a rider for a death benefit, which pays additional benefit in the event of a death resulting from an accident. You could also consider a family income benefit rider, which guarantees that your family will continue to receive your monthly income if you die prematurely.
A good time to reassess your insurance needs is when your circumstances change. Maintain a regular dialogue with your financial adviser. He can help you determine if your current insurance protection, savings and investment plans are adequate for both your present and future needs. Depending on the change, for example, new additions to the family or change in job which may bear financial strains, you may decide that you need either a higher or lower level of insurance protection (the sum insured), or additional riders or benefits such as for critical illness protection or for waiver of premium benefits to ensure the continued payment of policy during periods when you are unable to meet the payments.
You typically have a grace period of 30 or 31 days during which you can pay the premium with no interest charged. If you do not pay your premium within this grace period, and as long as your policy has sufficient cash value, the insurance company will automatically pay your overdue premium by taking a loan against the policy’s cash value. This keeps your policy in force but you will have to pay interest on this loan. This should be taken as a temporary measure only. If, for prolong periods, you are unable to continue paying for premiums on your policy, you should consult your FA representative to consider what other options are available. It may be possible to reduce the sum assured which in turn will reduce premiums.
Young families like yours can consider purchasing term insurance. This type of insurance offers the greatest amount of coverage at a lower cost.
It covers you for a pre-determined period of time. If you were to die or become totally and permanently disabled (if the benefit is provided) during that period, your beneficiary will be paid a death benefit to guard against financial loss. There are no cash payouts should you outlive the term but it does provide the necessary level of coverage at affordable premiums during the period you would most need it.
You can consider whole life insurance. With this policy, you are guaranteed lifelong protection as long as your premiums are paid.
In addition, most whole life policies accumulate a cash value over time. As such, it encourages long-term savings as your insurance company can invest on your behalf.
In case of an emergency or when you need to pay for something significant, as a temporary measure, you can take a loan from the policy’s cash value. Your policy will remain in force so that when the financial crunch is over, you can pay back the loan and be at the original level of death benefit without under medical tests or paying a higher premium.
Whole life insurance also pays out a death benefit so you can be assured that your family is protected against financial loss that can happen after your death.
For those who would like to pay premiums according to their current financial situation, they can consider a universal life insurance policy as it offers adjustable and flexible premiums. Within certain limits, you can choose the amount, method and timing of your premium payments.
In addition, universal life insurance has a death benefit feature and also allows one to build cash values which can be borrowed or withdrawn. Although the policy cash values earn interest at a declared rate which may change over time, most universal life plans guarantee a minimum interest crediting rate.
When you have no dependants, you are likely to have fewer concerns. As such, you can use insurance as an investment tool. You can either invest in a savings policy or an investment-linked policy, both of which may potentially offer higher returns than bank deposit interest rates. You may also want to purchase a whole life policy while you are young as premiums will be lower.
An insurance policy is a long-term commitment and any decision to cancel a policy should only be taken after careful consideration.
Early cancellation of a policy may incur additional fees and charges. However, what is more important is that you may be losing valuable benefits. Your health status would have changed since you first took out the policy and you may not be able to get a similar level of protection in a new policy as you will be required to declare all pre-existing conditions and possibly take a medical examination.
If you simply cannot afford to continue paying for premiums on your current policy, you should consult your FA representative to consider what the options are other than cancellation. It may be possible to reduce the sum insured and hence, reduce the premiums or in some instances, take a premium holiday on your policy.
After evaluating all the facts, should you decide that there are valid reasons for canceling your current policy and purchasing a new one, we would recommend that you do not cancel your original policy until you receive confirmation that your new policy is in force. This will ensure that you are not left without coverage for any interim period.
compareFIRST is accessible and easy to navigate to help individuals make better informed choices in making your purchase.
You can select the way you wish to review this information through different search functions – by type of insurance, product listing, or various criteria such as Sum Assured, Benefits, Premium prices, etc.
Other useful information for individuals include:
- Web links to calculators for budgeting, insurance need estimation, and retirement need calculation, as well as links to insurers’ corporate websites for more information.
- Educational literature to assist individuals to better understand and guide them in their search and research.
- Key information including the life insurance company’s credit rating and other qualitative factors to enable potential buyers to gain a holistic appreciation of the life insurer and insurance product in question.
DPI products are also available for comparison on compareFIRST. For consumers who require holistic financial planning, approach a trained and trusted financial adviser who can offer customised solutions to meet your protection needs.
compareFIRST is just one of numerous initiatives aimed at bridging the protection gap and thus securing the quality of life of the community in Singapore.