Life insurance in Singapore answers one question: if you died or could no longer work, how would the people who depend on you manage? The starting point is a sum, not a product. MoneySense’s rule of thumb is death and total permanent disability cover of about 9 times your annual income, and critical illness cover of about 4 times.
This guide shows how to turn that rule into your own figure, what each type of policy does, and the ways to buy. It is general information, not advice on what to buy.
How Much Life Insurance in Singapore Is Enough?
The Basic Financial Planning Guide on MoneySense gives these rules of thumb:
- Death and total permanent disability: about 9 times your annual income.
- Critical illness: about 4 times your annual income.
- Spending on insurance protection: no more than 15% of your income.
- Emergency fund: three to six months of expenses.
A worked example
Take an illustrative parent earning S$72,000 a year, with two young children and a home loan.
| Step | Amount |
|---|---|
| 9 times annual income | $648,000 |
| Less Dependants’ Protection Scheme cover | $70,000 |
| Less an existing term policy | $200,000 |
| Gap in death and disability cover | $378,000 |
| 4 times annual income, for critical illness | $288,000 |
| 15% of income, the most to spend on protection | $10,800 a year |
This is an illustration only. The existing term policy is hypothetical. The rule is a starting point, and your own number may be higher or lower.
It tends to be higher with young children, a large mortgage or a spouse who does not work. It tends to be lower if you have no dependants, substantial savings, or children who are already independent.
Our protection gap calculator runs the same sum with your own figures.
The short version: Work out the gap before you look at products. Count what you already have, including the Dependants’ Protection Scheme and any cover from your employer. Then choose the type of policy that fills the gap for as long as someone depends on you.
Count What You Already Have
Dependants’ Protection Scheme (DPS). CPF Board says citizens and Permanent Residents aged 21 to 65 are covered automatically once they make a valid CPF working contribution. It is term insurance that pays up to $70,000 on death, terminal illness or total permanent disability ($55,000 from the policy year you turn 60), with premiums deducted from CPF savings, according to the scheme administrator, Great Eastern Life.
Home Protection Scheme (HPS). If you use CPF to pay an HDB loan, HPS pays off the outstanding loan on death, terminal illness or total permanent disability. It protects the home, not your family’s income.
Our guide to the Dependants’ Protection Scheme and Home Protection Scheme has the premiums and rules.
Employer cover. Many employers provide group life insurance. It usually ends when you leave the job, so treat it as a bonus, not as the base.
The Types of Life Insurance
MoneySense sorts life insurance into term, which is protection only, and “bundled” products, which combine protection with savings or investment.
| Type | Cover lasts | Cash value | Relative cost | Investment risk to you |
|---|---|---|---|---|
| Term | A fixed period | Typically none | Lowest | None |
| Whole life (participating) | For life | Guaranteed part plus non-guaranteed bonuses | Higher than term | Yes, on the bonuses |
| Endowment | A fixed period, then pays out | Guaranteed part, and bonuses if participating | Higher than term | Yes, if participating |
| Investment-linked (ILP) | While units last | Value of the units | Varies | Yes |
Source: MoneySense, “Comparing term and bundled products”.
Term insurance covers a set number of years. MoneySense describes it as usually the most affordable option and suited to needs with an end date, such as the years until children are financially independent. DPS is an example. See our term life insurance guide.
Whole life insurance covers you for life and builds cash value. A participating policy pays non-guaranteed bonuses that depend on the insurer’s fund. Our comparison of whole life and term insurance works through the trade-off.
Endowment plans are sold as savings plans. MoneySense cautions that “they are not like deposits”: part of the premium pays for cover and the rest is invested.
Investment-linked policies use your premiums to buy units in funds. Some units are sold to pay for the insurance and fees. Returns are potentially higher and non-guaranteed, and the value can go down as well as up.
Riders add benefits such as critical illness cover to a main policy for an extra premium, which MoneySense notes could increase with age.
Three Ways to Buy
Through a financial adviser representative. You receive a recommendation based on your circumstances. Ask the representative to explain the policy’s features, the calculations and why it is recommended for you.
Direct Purchase Insurance (DPI). According to MoneySense, these are term and whole life policies bought straight from the insurer, with no advice and no commission. They cover death, terminal illness and total permanent disability, with an optional critical illness rider.
The limits: up to $400,000 of term DPI per insurer, up to $200,000 of whole life DPI per insurer, and $400,000 in total across all DPI policies. The minimum entry age is 18.
Online. Some insurers sell term insurance on their websites.
Whichever route you take, compareFIRST lets you compare premiums and features of term, whole life, endowment and investment-linked policies across insurers. The portal lists the Consumers Association of Singapore, MAS, the Life Insurance Association and MoneySense as its partners.
Before You Sign, and Before You Switch
MoneySense’s checklist is worth following closely.
- Disclose everything asked. Errors or omissions on the proposal form may void the policy, leaving your dependants without cover.
- Separate guaranteed from non-guaranteed. Ask which figures are which, and what the risks are for the non-guaranteed part.
- Ask about stopping early. MoneySense warns that with bundled policies such as endowments, you may not get back what you put in.
- Be careful about replacing a policy. MoneySense warns that it may be costly to terminate and replace a product in the early years. Ask whether the switch brings a penalty, extra costs or fewer benefits.
- Do not buy what you do not understand. You are not obliged to decide on the spot.
If an insurer fails, the Policy Owners’ Protection Scheme protects guaranteed benefits up to limits: $500,000 of guaranteed sum assured and $100,000 of guaranteed surrender value per life assured per insurer, according to MoneySense.
What To Do Next
- List the cover you already have: DPS, HPS, employer cover and any personal policies, with the sum assured and end date of each.
- Run your figures through the protection gap calculator.
- Check the premium fits. Our monthly budget planner shows what 15% of income looks like beside your other commitments.
- Compare a few policies on compareFIRST. If term cover fits your need, our term life insurance comparison explains how plans differ.
- Life insurance pays a lump sum; it does not pay hospital bills. Our health insurance glossary covers that side.
