How much do you know about Life Insurance
Understanding the life policy you’ve just bought, its benefits, limitations and options available can be daunting to many.
We know that our policyholders deserve information that’s easier to understand and hence, we’ve have selected some
important terms of a life insurance policy and put them into simpler words here.
1 Can I pay my premiums only for a specific number of years?
Yes. There is a limited payment whole life policy available where you have the option to make premium payment for a
specific number of years but at the same enjoy the coverage for the whole of life. However, please note that if you opt
for premium payment for a shorter period, the annual premium charged will be higher.
Such policies are usually preferred by individuals who wish to pay premiums only for a fixed number of years, and yet
still enjoy the protection and coverage for whole of life. Another variation of such product will be Whole Life Policy
where you pay premiums for as long as you survive.
2 What is Reduced Paid-Up Assurance?
For a policy which has accumulated an amount of cash value, you can choose to stop paying premiums and yet enjoy
a certain level of coverage. By opting for a Reduced Paid-Up Assurance means that you can stop your future premium
payments and yet enjoy coverage at a reduced or lowered sum assured, with your policy continues to be kept in-force.
This is a popular choice for individuals who no longer require a high sum assured but would still like to have some level
of protection.
3 Need Money? Take a Policy Loan.
A policy loan is an advance payment that can be granted for your short-term financial needs. Once the policy has
accumulated sufficient cash value, you can apply for a policy loan if the need arises. However, this does not apply to for
Investment-Linked, Term and CPF-related policies.
Typically, you may borrow up to a maximum of 90% of the policy cash value, and this may vary depending on the Insurance
Company. Like a bank loan, such policy loan comes with interest rates as per the Insurance Company’s discretion.
It’s recommended that you make repayment, be it in full or partial, to avoid the accumulation of interest. Please check
with your Insurance Company on the available repayment options.
4 Need some reliefs from Premium Payment? You can activate a Automatic Premium Loan (APL) /
Non-Forfeiture Loan (NFL)
APL or NFL is a feature where your policy’s cash value is used to settle your unpaid premiums. This feature will only kick in
if your policy has available cash value and that you’ve not made payment for your premium after the grace period. Similar
to a policy loan, an APL or NFL comes with interest rates as per the Insurer’s discretion.
Please note that once your policy’s cash value has been used up, your policy will lapse or be terminated.
Aviva Ltd 4 Shenton Way #01-01 SGX Centre 2 Singaore 068807 Tel: (65) 6827 2988 Fax:(65) 6827 7900 www.aviva.com.sg
Company Reg. No.: 16900499K GST Reg. No.:MR-8500166-8
5 Does my Policy earn Bonuses?
If your policy is a called a participating policy, it means that your policy shares in the profits or losses of the Participating
Fund managed by your Insurer. The sharing of profits or losses is done through a form of bonuses added to your policy,
and declared to you annually. The Insurer will adopt investment strategies via a basket of mixed assets which gives
potential growth and investment returns while giving protection against the ups and downs of investment markets
(known as ‘smoothing’).
6 Types of Bonuses
For most participating policies, there are two common types of bonuses:
• Annual Bonuses or Reversionary Bonuses, which may be added annually to your policy. Once added to your policy,
it becomes guaranteed and increases both the protection and cash value of your policy.
• Special Bonus or Terminal Bonus, which may be added on top of annual bonuses, in the event of a claim or when
your plan matures. Such bonus is usually non-guaranteed and may or may not be added depending on the Insurer
7 What is an Investment-linked Insurance Policy (ILP)?
ILP policies consist of two components - life insurance and investment. Your premiums are used to buy units in the
investment-linked sub-fund(s) that you have chosen, and another part are used to fund for insurance protection and other
policy charges spelt out in the policy contract.
ILP is generally suitable for individuals who prefer to have some level of protection while seeking potentially higher growth
through investment exposures as compared to traditional life insurance products. Such policies provide insurance protection in the event of death or total and permanent disability (TPD). The death or TPD benefit may consist of either the
higher of the sum assured or value of the ILP units or a combination of the sum assured and the value of ILP units,
depending on the features of the policy.
When you surrender the policy, your surrender value will be based on the value of the units of the sub-fund(s) at the time
of surrender. Please note that the cash value and rate of investment returns of such ILPs is not guaranteed and is subject
to the performance of the investment-linked sub-fund(s) chosen.
8 Do you know the difference between a Whole Life Insurance and a Term Life Insurance?
The most obvious difference between the two is cost. The premiums in whole life policies contribute towards accumulation
of cash value and providing a death benefit. For term life, the policy does not acquire any cash value but it offers protection
in the form of a death benefit.
For the same sum assured, whole life insurance premiums are generally higher than term life. Term life insurance policies
last only a specific term- a named period before the policy expires. An individual can choose to renew the policy upon the
expiration but this will beat a higher premium, based on your age and health condition.
Whole life insurance premiums, may be higher initially but it usually stays the same with time as it is meant to last for life,
and as long as the premiums are paid, it will be in force regardless of age and health condition.
We hope this has helped you in understanding your life insurance policy better.
Please note that this serves as a guide and please obtain own legal or financial advice as deemed necessary.
Aviva Ltd 4 Shenton Way #01-01 SGX Centre 2 Singaore 068807 Tel: (65) 6827 2988 Fax:(65) 6827 7900 www.aviva.com.sg
Company Reg. No.: 16900499K GST Reg. No.:MR-8500166-8