SingaporeMotherhood | Parenting
February 2014
Choose the Right Insurance Policy for Your Family
Purchasing insurance for your family? Ms Ho Lee Yen, Chief Marketing Officer at AIA Singapore, offers some points to consider.
The 2011 AIA Singapore Nationwide Protection Survey revealed that although 93 per cent of Singaporeans already own life insurance policies, the majority are still under-insured. In fact, less than one in 10 people in Singapore is adequately insured.
Besides providing a peace of mind, buying a life insurance policy helps protect you and your family even if an unfortunate event happens.
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There are many insurance policies available in the market today, and you could already have several. But the question to ask is this: which policy best fits my needs?
No ‘one-size-fits-all’ insurance
There is no ‘one-size-fits-all’ or fixed formula in life insurance as everyone has varied and evolving needs and priorities.
This is why life insurance companies offer a wide array of products to meet the needs of individuals and their families, at different stages of their lives.
Speak with your financial consultant on a regular basis. He or she can help to review your portfolio and recommend suitable policies to meet the evolving needs of yourself and your family. Apart from this? what else can you do to help you in choosing a policy?
1. Speak To Your Spouse About Financial Protection Needs
Granted, you’d probably have discussed money and insurance matters with each other before marriage. But this is a topic that should be brought up on an annual basis, at least, as your family’s needs change.
It is important to understand the needs of yourself and your family, in order to make informed and suitable financial planning decisions.
This is especially since the 2011 AIA Singapore Nationwide Protection Survey found that while 74 per cent of respondents have reviewed their financial protection needs with their spouse, only 47 per cent are aware of details pertaining to their spouse’s life insurance policies.
Engage your spouse in conversation about the family’s protection needs, so that both of you can better understand and plan for your family’s financial future and be adequately protected at every step of the way.
2. ‘Fact Find’: It’s Important
The ‘fact find’ is a financial needs-analysis process. During this process, a financial consultant will ask you about your financial details, financial situation, needs, objectives and goals.
This information is captured in a document. It will allow your financial consultant to do a proper analysis on your current financial situation, before recommending appropriate solutions to help you achieve your financial and protection goals.
3. Know The Different Types Of Policies Available
As you are the one who will ultimately make the final decision on which plan(s) to purchase, it is important to understand the various types of insurance plans offered and how each may serve your specific needs. These are some products that you may consider.
Investment Linked Plans (ILP)
An ILP combines the benefits of insurance protection and investment. According to the 2011 AIA Singapore Nationwide Protection Survey, ILPs are a popular choice among Singaporeans. One in two respondents seeking to purchase life insurance in the next two years cited that they are most likely to purchase ILPs.
In general, a portion of the premium will go towards buying units in managed funds which you get to select depending on your risk appetite. It also provides you with the flexibility of adjusting the level of protection and investment depending on your life stage needs. For instance, the less insurance protection offered, the greater the amount of premium that goes towards your investment objectives and vice versa.
With ILPs, you need to be comfortable to take on more risks as the value of your investment depends on the performance of the managed funds you choose which may rise or fall.
Term Plans
Term plans provide protection coverage for a fixed period. Consumers looking for pure protection coverage at a low cost like these plans. Term plans generally does not provide cash values.
Whole Life Plans
Whole Life plans usually provide coverage for your entire lifetime with some guaranteed savings. As such plans build up cash value over time, the premiums tend to be higher than a term plan. As long as the premiums are paid, the coverage continues until death or when you wish to cash out the policy at some point in time, whichever is earlier.
Whole life plans are suitable for customers who are looking for some measure of guarantee in their savings and insurance protection, as well as those who seek to provide life-long protection for their dependants, as it pays out the death benefit upon the death of the insured.
Endowment Plans
Endowment Plans provide a combination of insurance protection and savings for a stipulated period of time e.g. 10, 15, 20 years or up to a certain age limit.
They are typically attractive to those saving for retirement or their children’s higher education where you need a specific amount by a specific date.
Whole Life Vs Endowment Vs Term
Whole life and Endowment plans are usually available as participating (“par”) plans, while Term plans are usually available as non-participating (“non-par”) plans.
Par plans allow the policyholder to participate in the performance of the participating fund in the form of bonuses or dividends. Upon the death of the insured, par plans usually pay the basic sum assured plus any bonuses or dividends accumulated to date as the death benefit.
Non-par plans do not share in the profits of the insurance fund. Correspondingly, non-par plan policyholders do not enjoy bonuses and dividends. The death benefit of a non-par plan therefore comprises of the sum assured only.
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