When you buy an insurance plan, you need to premiums for your insurance cover. But not all insurances work the same way. Some insurance coverages provide benefit to the beneficiaries on the death of the insured person. With whole life insurance, you get the return of premium benefit on survival. But they do come at a cost significantly higher than term insurance or other life insurance plans. Here are the five things that you need to know about a whole life term plan before purchasing one for you and your family.
What is whole life insurance?
It is the insurance coverage for your entire life or until death. This could be up to 99 years old or until your death. Your dependents get lifelong protection. There are some whole life insurance plans that cover total and permanent disability (TPD) as well as support for critical illness expenses. You can buy whole life insurance for yourself and even for your children. The recommended coverage for whole insurance is 5x your annual salary or depending on whatever liabilities you have.
Types of whole life insurance plans:
A participating policy: Under this policy, the policyholder gets to share the profits of the insurance company in the form of bonuses or dividends.
A non-participating policy: Under this policy, the policyholder will not get any dividends or bonuses.
Five things you didn’t know about whole life insurance
• Cash value: There is a cash value associated with your policy. You get guaranteed and non-guaranteed returns depending on whether you have bought participating or non-participating insurance policy.
• Coverage for entire life: Whole life insurance is the only policy where you can enjoy a sufficient life cover during your earning years as well as after retirements. That’s why the premiums are costly than term insurance or other policies. If you have budget constraints and want to know if it is the best option, you can use CompareFIRST to compare different insurances. CompareFIRST is an online portal where you can compare pricing, benefits and other features of similar insurance plans.
• Paid upon surviving the plan period: This is the only insurance plan that lets you recover all the money you paid upon surviving the maturity of the policy term.
• Leave an estate for children: Whole life insurance policy pays you the maturity amount in case of natural death to your beneficiaries such as children or grandchildren. You can transfer a tax-free estate to your family members. Look for estate planning tips so that you can transfer your assets, including the whole life insurance coverage amount, to your loved ones after you die.
• Boost your coverage: There are ways to boost your coverage with multipliers to increase your sum assured for a period of time.
Whole life insurance not only provides you coverage during your working years but also after retirement until you die. The sum assured will be transferred to the beneficiaries. It is a good option for young families in Singapore only if they are ready to pay higher premiums and want to get higher returns. You can always use ComapreFIRST if you are not sure whether you should buy term insurance or whole life insurance.