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about life insurance


A brief guide

Who needs life insurance?

If you have a spouse, children, or elderly parents who depend on you for financial support, then buying life insurance to provide them with a financial safety net and stability is a smart move. It is also a good idea to buy life insurance if you have taken loans, such as student loan or a mortgage loan,that would need to be settled in the event of your death. 

Many people think single people don’t need life insurance, but if you have financial dependents such as elderly parents, or siblings, and you don’t want to leave them your debt, it’s a smart idea to buy life insurance.  Plus, buying insurance when you are younger and healthier can get you a better rate.

How does life insurance work and what does it cover?

You have to assess your own needs, and determine the type of policy, the amount of cover, and the duration (term) of cover you require (more details below).  A Phillip Life Insurance Planner can help you with this assessment. 

You then request for a free product illustration, and if you are happy with the quotation, you submit an application for a policy.  If we accept your application, you will have to pay an annual premium in return for a life insurance policy. 

The policy contract provides full details of the insurance cover purchased. When you complete an application form, you will also be asked to include details of the beneficiary/s who would benefit from the policy if you do not survive until the end of the policy term.  This pay-out can be used by your family to help them cover living costs while they adjust to life without you.

These costs might include things like paying rent or housing loan payments, paying for child

care or other domestic help, paying for children’s future college expenses, or providing ongoing financial support for a spouse, among other things. The money can also be used to settle any unpaid medical bills or any outstanding loans. 

If you have bought a policy with accumulated cash-values (like the Endowment policy), there will also be a pay-out when you live up to the maturity date (end of term) of the policy.  Most life insurance policies pay out benefits on death or on total and permanent disablement.

What is total and permanent disablement (TPD)?

TPD means the complete and continuous inability of a life assured to carry

out any work, occupation or profession to earn or obtain any wages,

compensation or profit. 

The total and irrecoverable 

  • loss of the sight of both eyes, or
  • the loss by severance of both hands at or above the wrists, or
  • the loss of both feet at or above the ankles or
  • the loss of one hand at or above the wrist and one foot at or above the ankle, or 
  • the loss of sight of one eye and loss by severance of one limb  

will also be considered as total and permanent disablement.

What types of life insurance are available?

There are many different types of life insurance products available. They generally fall under two main categories: term policies and cash-value policies.

Term policies are a good choice for many people because they are pure insurance.  They have low annual payments and are easy to understand. They pay benefits if you should pass away within the term of your coverage.

Term policies can typically be purchased for durations of 1, 5, 10 years or more. Term life insurance is a good choice especially if you want low-cost coverage mainly while your children are young (or while your aging parents might need extra help) if something were to happen to you.

Cash-value policies (called “whole-life”, “endowment” policies), are more complex, because they involve both the pure insurance component of a term policy plus an additional investment component.

They are usually many times more expensive than term policies for the same amount of coverage. They run for longer terms. 

Whole-life policies can last a lifetime. Many people prefer paying higher annual payments for a policy with cash-values and also like a bundled insurance/investment product.

However, some people like keeping their insurance and investment products separate, and prefer using the money saved by purchasing a term policy for other purposes

How much life insurance do I need?

The easiest way to answer this question is to consider how much debt you have (for example housing, vehicle or personal loans, or credit card balances) and how much financial

support you’d like to provide for your family (like funding for housing, living expenses, children’s education) — then subtract your current savings and assets. 

This gives you the total amount of money your family would require to maintain their current lifestyle if something were to happen to you. This is the coverage amount (sum assured) you

need.

How long should my life insurance last?

There are a few factors to consider when determining for how long you should have life insurance coverage (also called the “term” or “policy duration”). 

If you have a housing loan, start by looking at when your mortgage term will come to an end. Also look at what year your last child will graduate from college and

when you plan to retire.

It makes sense that your policy should last at least through all these events.

Lastly, cost is also a consideration when evaluating the duration of your life insurance coverage.  Longer terms are a bit more expensive per year than shorter terms in level-price endowment policies, because Phillip Life is guaranteeing the same price (premium) during the entire period

How often should I review my life insurance needs?

Life is dynamic, and as it changes your coverage should change too, so that your life insurance is appropriate for what you need at each stage of your life.

So, for instance, if you have another child, purchase a new home, or incur new debt, it would make sense to apply to increase your life insurance coverage to take into consideration these changes.

What happens when my term life insurance coverage ends?

At the end of your policy term, your life insurance coverage ends. At this point you may need to review your insurance needs again.    

If your children have grown up, or you’ve saved for retirement, and your biggest financial commitments are already behind you, you may no longer need the coverage.  But if you are interested in taking up a new policy, your insurance adviser  will be pleased to provide you with advice and help you submit a new application. 

As the lock-in period is over, the insurance payments could be significantly more

expensive because of age, health and other reasons.

What happens when my endowment life insurance coverage ends?

At the end of your policy term (if you have made all the annual payments), your life insurance coverage ends. You will receive the guaranteed maturity benefit of your policy.  

If you are interested in taking up a new policy, you will have to submit a new application.  As the lock-in period is over, the insurance payments could be significantly more expensive because of age, health and other reasons.

When is the best time to buy life insurance?

The simple answer is sooner, rather than later.  When you are young and healthy, you are a lower risk to insure, so your annual payments tend to be less. 

Getting life insurance early helps you ‘lock in’ pricing when you’re young and healthy since these policies offer a guarantee that your annual payment stays the same throughout the term of the policy. 

This could provide a more affordable life insurance payment that will last for the entire term of your policy and could actually save you money over time.

The annual premiums of a Yearly Renewable Term Assurance (YRT) policy, on the other hand, increases with age, but Phillip Life guarantees to renew your policy for the duration of the cover selected.

How much will my life insurance cost each year?

Your yearly payment takes into account your age, health, and sex, as well as the term and sum assured of your desired policy. 

Get a free quote from any of our Insurance Advisors or Planners to see how affordable it is.

I already have life insurance with my employer? Isn’t that enough?

You might think the life insurance provided by your employer is enough, but often it’s not.

 Many people are surprised to learn that the life insurance included as part of their employment benefits pacage can be only 1 to 2 times their annual salary, while you may need 5 to 10 times your salary in coverage, or even up to 20 times your salary, especially if you’re a young family that is just starting out.

In short, the life insurance that an employer provides is usually not enough for the long term, so it is a good idea to take out an additional policy to ensure your family’s full protection.

Many people also only find out that the life insurance provided through their employer ends immediately upon leaving their job.

Having your own insurance, outside of the insurance provided by your employer, also provides you with the security of extra coverage should you leave your job, losing access to that particular benefit.

It’s also worth noting that most people don’t plan to retire from the same company they work for today, and not all employers offer life insurance benefits. 

When you consider this, and also keep in mind how much more it can cost to purchase life insurance when you are older, it’s usually a wise move to choose to own your life insurance directly and to get it while you are young. Read more about this topic here.

Does my stay-at-home spouse need life insurance too?

While your stay-at-home spouse may not be working a full time paid job, the amount of work he or she is doing is invaluable, so life insurance can be a good idea. 

Your stay-at-home partner likely provides all kinds of unpaid work that keeps your household running, and it can be expensive to hire external help for childcare, housework, and

managing household finances, should you find yourself in the unfortunate circumstance where you need to.

For these reasons, it’s a wise decision to insure both adults in your household, regardless of whether they bring in income, or not.