WHY 80% PEOPLE OWNING WHOLE LIFE INSURANCE IN SINGAPORE?
- Phan Vivian
- Jan 26, 2024
- 5 min read
Why people not willing to pay for something with high prices. But for the whole life insurance, it is another story. WHY? See it right now!
Looking at life insurance as a form of disciplined money saving and a future financial protection solution, more than 80% of Singaporeans participate in life insurance.
With this, in addition to the government's role, there is an important role in the insurance sales team who directly deliver products to customers.
According to data published by the Singapore Life Insurance Association in March of the previous 4 years as a 2016 range, the newly exploited revenue is estimated at 3,286.2 billion, up 10% compared to 2015. In which, revenue from exploiting channels through agents accounts for 37%, through banks accounts for 38%, through financial consulting 21%, other channels 4%.
One thing worth noting is that the insurance sales channel through the bank is growing strongly; By 2016, it has surpassed other traditional channels. This is a difference of Singapore compared to many other countries in the region in exploiting this channel.
From that data, it can be known that, although it has been last for 4 years but the behavior of people in Singapore nowadays is care more about their whole life insurance.
1/ WHAT IS WHOLE LIFE INSURANCE?
Whole life insurance provides life-long protection. It is available in different forms, such as participating and non-participating policies.
2/ HOW MANY TYPES OF INSURANCE?
There are two common types of life insurance policies that you can choose from.
The first is term insurance.
Term insurance is a valid policy for a fixed period of time. For example, a 30-year-old individual can buy a 20-year insurance policy for insurance until age 50. If nothing happens to the individual within the term, the policy expires when he is 50 years old without Payment value or cash.
Another type of life insurance you can buy is a whole life insurance policy.
Unlike term insurance, lifetime insurance participation provides you, your employer, insurance until the end of your life.
In addition, there is also a cash value component that provides a cash payment if policy owners abandon their policy.
Participating in life insurance policies tends to be more expensive since you receive coverage up till your death and due to the cash value component associated with the policies. That's why you understand how it can work for you before buying it.
Participating whole life policies
What Does “Participating” Policies Mean?
Participating insurance policies are policies that provide both guaranteed and non-guaranteed returns. Policyholders are allowed to participate in the share of profits of the insurer’s participating fund. The performance of the fund provides the non-guaranteed returns of the insurance policy. Participating life insurance —also called whole life insurance—combines lifetime insurance protection with a tax-advantaged investment component.
You can use participating life insurance to:
Pay final expenses and any debts you may have
Ensure your family has the resources to maintain a comfortable standard of living
Pay any taxes owing on your estate so more of your estate is transferred to your children or grandchildren
Leave a legacy in your community or with your favorite charity
Provide your business with the money necessary to fund a buy-sell agreement
Protect your business against the loss of a key employee
During your lifetime, it can:
Build tax-advantaged savings that you can draw upon as needed for personal or business opportunities; any cash values withdrawn from the policy may be subject to tax
Supplement your retirement income
Provide funds for long-term care or home care
Non-participating whole life policies
Non-participating whole life policies have guaranteed claims benefits and cash values.
What is the best choice?
Most people are attracted to participating whole life insurance for life mainly due to the fact that payment in a fixed period of time while coverage lasts for the entire life. Cash composition also makes it more attractive.
It’s much more expensive, but it has the potential to grow the money you paid. The potential growth varies depending on whether your whole life insurance is an endowment plan or an investment-linked policy (ILP).
In either case, the “advantage” of whole life insurance over term insurance is that, even if you terminate and surrender the policy, you can get back some of the monetary value.
Because it's the main objective is: Protection with savings element – accumulation of future bonuses or cash dividends
3/ HOW DOES PARTICIPATE WHOLE LIFE INSURANCE WORKS?
As a trend, people nowadays refer to a participating whole life insurance policy is indeed
Limited Pay Period; Whole Life Coverage
One of the key selling points of whole life insurance is that policyholders only pay premiums for a limited period in return for life coverage.
For example, purchasing whole life insurance may entail paying an annual premium for 25 years. Following that, payment would stop, but coverage would continue to persist.
Some of the following lists will show you how life insurance works
Scope of coverage
Covers death
The most product allows you to add riders: total permanent disability, critical illness, early critical illness, waiver of riders
Payment schedules and definition or riders vary across products and insurers
Cash Value
Typically cash value comprises of guaranteed benefits and non-guaranteed bonuses
When you surrender your policy, you will only receive the cash of the guaranteed and vested bonuses which may be less than the total death benefit of the policy
Bonuses have a guaranteed and non-guaranteed component
Bonuses are declared each year, based mainly on the performance of the participating fund. Once declared and added to the policy, it is guaranteed and the insurer cannot take it away or reduce the amount.
A policy loan can be taken against the cash value of a policy. The interest charges can be steep. Any unpaid amounts from the loan will be offset from the policy’s cash value or claim payout.
Premium level and charges
Premium is typically fixed at the point of purchase and will not increase over the years
Premiums can be payable either throughout the policy term or for a limited number of years.
Typically require higher premium than term insurance for the same level of coverage
For after all, when you buy a participating whole life insurance policy, you need to ensure that the policy that you buy provides the coverage that you need.
Death benefits Surrender value
When contract owners buy a life insurance policy to participate, there are two ways to make payments for contract owners.
Death benefits:
The first is through death benefit payments. This happens when policy owners go through. When that happens, the legal representative for the contract owner can submit an insurance claim.
Death benefit payments will include the guaranteed amount plus any unsecured interest accrued in the policy.
Surrender value:
The second way payment is made is when a policyholder waives his or her insurance policy. If a policy owner feels he no longer needs insurance, he can give up the policy. He will receive the cash value of the policy at the time the policy is surrendered.
Please note that giving up a life insurance policy will give policyholders less than the death benefit payment at the same time.
Things to note
Premiums for buying whole life increase as you get older
Buying a life insurance policy is a long-term commitment. Early termination causes you to lose money.
You can choose, to protect yourself and your family at risk. And we will constantly strive to serve our dedicated and dedicated customers and better. Insurance helps to protect you/or your loved ones against financial loss when certain events happen. Financial planning that works for one might not work for another. Click here for us to have personalized financial planning exclusively for you.
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