Aon Hewitt
Health & Benefits | Aon BenefitsPLUS
The ABC of Life Insurance
Life Insurance doesn’t have to be a mystery. Buying it does not need to be frustrating or
stressful, but getting it right is very important. Learn the basics first so you can go on to
choose your coverage wisely. Many people think insurance is very costly and remain
unprotected – but this is not the case.
Here is how to make choosing the right life insurance as easy as A, B, C.
A. Assessing the Need
Term Life Policies
Most Singaporeans have some need for life
insurance. There are very few exceptions to this
rule. Here are some of the people who think they
do not need life insurance:
In general, Term Life Insurance requires lower
premium payments and is less complicated. This is
because Term Life Insurance does not accumulate
bonuses (savings component). A Term Life policy
simply guarantees a specific sum assured in the event
of your death while the policy is still active. Essentially,
Term Life coverage works like a “parachute” to cover
your family during the years in which an unexpected
tragedy could be most financially disruptive, say,
before your dependant’s needs are settled or your
housing mortgage is paid off.
• People who have already raised their children
and now live on their own
• People who are young and single; typically
responsible for only themselves
• People who have the financial resourses to
support surviving family members after
they’re gone
Unfortunately all these people are wrong! They all
are likely to have a need for life insurance, even if it
is a small need.
However, if you are independently
wealthy, have no living family members,
friends or charities that depend on you or
your income then you may not need life
insurance. Is this you?
B. Be informed of how insurance works
Life policies generally fall into two types. Term Life
Insurance or Whole Life Insurance.
Term Life Insurance simply provides death benefits.
It is just pure life insurance, plain and simple. It
provides protection for a set period and pays the
sum assured when you die. Whole Life Insurance
provides life-long protection and pays the sum
assured plus any bonuses accrued when you
die. Both Term Life and Whole Life Insurance
policies can include extra cover such as Total and
Permanent Disability and Critical Illness cover.
Risk. Reinsurance. Human Resources.
Let’s look at an example;
• Ben has a term life policy that he bought when
he was 35 years old. It is a 30 year policy, so it will
expire when he is 65. His family will only get money
from the policy if he dies before age 65. He is 40
years old now.
• Ben pays a fixed premium of $118 a month and will
pay that until age 65. The policy has a sum assured
of $200,000 cover and also provides Total and
Permanent Disability as well as Critical Illness.
• Should Ben pass away before age 65 his family will
receive the proceeds of the death benefit – in this
case $200,000.
• There will also be a lump sum payment should Ben
become totally and permanently disabled or suffer a
prescribed critical illness before age 65.
This example does not discuss whether the sum assured
of $200,000 is adequate for his family’s needs. If Ben
was wise he would have consulted a qualified financial
adviser for advice. What it does show is that this is a
simple lower cost solution to meet his current protection
This could be
a good time
to review
your existing
protection needs
Allan Janjawi
+65.9071.5090
[email protected]
Angie Fong
+65.9795.8939
[email protected]
Celine Ng
+65.9455.2060
[email protected]
Ray Tan
+65.9690.6472
[email protected]
Rick Png
+65.9653.2013
[email protected]
Susan Lim
+65.9007.3993
[email protected]
Tom Yang
+65.9450.5549
[email protected]
Aon Hewitt
Health & Benefits | Aon BenefitsPLUS
needs while also offering the options to cover other
life changing events such as a total and permanent
disability or a major critical illness.
“Term insurance is only worth anything if
you die, become disabled or suffer from a
critical Illness.”
financial adviser for advice. What it does show is that
there is an alternative solution to simple Term Life
Insurance to meet his current protection needs which
also accumulates bonuses (Savings component). Like
Term Life it also offers the options to cover for other life
changing events such as a total disability or a major
critical illness.
Whole Life Policies
Combination of Term Life and Whole Life
Whole Life Insurance policies provide the death
benefits of a term policy but do not expire at
the end of a specified term. Instead, Whole Life
Insurance provides cover for life and accrues
bonuses (savings) over time.
With the right advice you can structure your
protection needs using a combination of Term
Life Insurance and Whole Life Insurance. This
may be because in your younger years you have
many financial commitments and cannot afford
the premiums of a Whole Life Insurance policy
but still need a certain level of life cover. This is
where a Term Life Insurance policy may meet
your needs and not be such a burden on your
monthly budget. Later in life or with a higher
paying job you may need more life insurance cover
and can afford to pay the premiums of a Whole
Life Insurance policy from your monthly budget.
The benefit to you of this is that you will now be
accumulating bonuses as part of your savings plan.
In this example both policies will combine to
cover your total insurance needs within your
ability to comfortably pay the premiums from your
monthly budget.
When you die, the policy will pay the sum assured
plus any bonuses. The premium for this kind of
policy is higher than for Term Life Insurance.
The reason for this is that a portion of your
premiums is invested by the insurance company
on your behalf.
Generally these policies can also include Total and
Permanent Disability and Critical Illness cover so
the sum assured plus any bonuses will be paid if
one of these events occur and the policy will then
expire – however the criteria may vary depending
on the insurer and policy selected.
Lets look at an example of Whole Life Insurance.
In this case Alex wants to include a savings
component with his life cover as part of a savings
plan.
• Alex is 35 and has bought a whole life policy for a
sum assured of $200,000 which includes Total and
Permanent Disability and Critical Illness cover.
• Even though his policy provides the same coverage
as Ben’s, his premium is $406 a month to cover the
investment component and he will have to pay that
premium until age 84 or death.
• Should Alex pass away his family will receive the
proceeds of the sum assured – in this case $200,000
plus any bonuses.
There will also be a lump sum payment should Alex
become Totally and Permanently Disabled or suffer
a prescribed Critical Illness.
Again, this example does not discuss whether the
sum assured of $200,000 is adequate for his family’s
needs. Alex was wise and consulted a qualified
Risk. Reinsurance. Human Resources.
“Whole Life insurance covers you for a
lifetime, but it is not practical to pay a
higher premium for the same coverage if
you are only concerned about protection
and not investment”
C. Let’s calculate the cost
Many people shy away from life insurance because
they believe its just too expensive without ever
looking at what it really costs. As we have just
shown, one of the most affordable forms of life
insurance is Term Life Insurance.
Below is a table showing how much it will cost
you every year for Term Life Insurance coverage of
$300,000 and $500,000 at different entry ages to
age 65 and includes Death cover, Terminal Illness
(TI) and Total Permanent Disability (TPD) cover.
You will see that even the most expensive premium
is less than $4.00 per day. This is a small price for
life insurance to protect your family and give peace
of mind.
Aon Hewitt
Health & Benefits | Aon BenefitsPLUS
Yearly Term Premium
Yearly Term Premium
(DEATH + TI + TPD)
(DEATH + TI + TPD)
sum assured $300,000 to age 65
sum assured $500,000 to age 65
Male
Female
Male
Female
Age 30
$495
$362
$634
$464
Age 35
$631
$446
$846
$599
Age 40
$813
$551
$1,065
$723
Age 45
$1,026
$673
$1,437
$943
Less than $4.00 a day
Use this as a guide only. Premiums and sum assured are accurate as at 12 October 2015 (AXA) and may vary.
Who should I discuss my insurance
needs with?
Insurance policies were not created equally – so
policy shoppers have to do their homework. That is
why you should always seek advice from a qualified
financial adviser, such as your Aon BenefitsPLUS
representative who will look at your existing
insurances and undertake a fact-find with you to
evaluate your needs and then make the appropriate
recommendations. Based on the results from our
analysis, we will be able to identify where your gaps
are before making our recommendations. Aon is
able to provide you with appropriate solutions as
we work on an independent advisory process that
is non-bias towards any insurance companies or
insurance products.
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