Term Life and Whole Life Insurance
General knowledge only; not about any particular insurer or product, and not a product recommendation or investment, tax or legal advice. Policy terms and official documents prevail.
In one sentence
Life insurance pays the sum assured on the death of the life insured (some also on total and permanent disability or terminal illness), to replace family income, repay debts or leave a legacy.
How it works
- Term life: covers an agreed period (e.g. 20 years or to age 65) and ends at expiry; there is generally no or very little cash value, and premiums are lower for the same sum assured.
- Whole life: covers for life and builds up cash value; it can be participating or non-participating, and premiums are relatively higher.
- Both can be combined with riders such as critical illness, disability and premium waiver.
Key concepts
| Concept | Meaning |
|---|---|
| Sum assured | The amount paid on the death of the life insured. |
| Total and permanent disability (TPD) | Total and permanent disability as defined in the terms; some policies pay out early. |
| Renewal / conversion option | Some term policies can be renewed at expiry or converted to whole life, subject to the terms. |
| Underwriting | The insurer decides whether to accept the application and at what rate based on health, occupation and finances. |
Usually suitable for
- Family breadwinners, and people with a mortgage or children to raise
- People who want to leave a definite amount to their family
Usually not suitable for
- People whose assets already cover their family responsibilities should reassess the sum assured
Risks to note
- Term life provides no cover after expiry, and buying again then costs more or may be declined.
- Surrendering whole life early means a loss.
- A sum assured that is too low or too high both affect family planning.
Questions to ask
- How much cover does my family need?
- To what age should cover last?
- Can I renew or convert in future?
- What does each rider cover?
Common misconceptions
Misconception: Term life premiums don't come back, so it's not worth it?
Term life provides high cover for a lower premium and suits family responsibilities during a particular stage.
Misconception: The higher the sum assured, the better?
The sum assured should be based on family expenses, debts and children's ages, while also considering the premium burden.
Official references
MoneySense guide to life insurance; LIA Protection Gap Study; MAS (website: mas.gov.sg, moneysense.gov.sg, lia.org.sg)
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