Term life insurance in Singapore pays a lump sum if you die, or in most plans become totally and permanently disabled, within a fixed period you choose. It has no savings element, so the premium buys cover and nothing else. That is why it is usually the cheapest way to insure a large amount.
Most working adults already hold a small term policy without having chosen it. This guide explains how term cover works, the types on sale, and where its limits are.
How Term Life Insurance Works
MoneySense describes term insurance as life insurance that provides cover only for a fixed period of time. You pick a sum assured and a term. You pay premiums. If the insured event happens within the term, the insurer pays the sum assured.
Three things follow from that simple design.
- No cash value. MoneySense lists the cash value as “typically none”. If you stop paying, or the term ends, there is nothing to collect.
- No investment risk. No part of the premium is invested for you.
- Cover has an end date. After expiry, you and your dependants are not protected.
Types of Term Life Insurance in Singapore
| Type | How the cover behaves | Commonly used for |
|---|---|---|
| Level (fixed) term | Sum assured stays the same throughout | Replacing income for dependants |
| Decreasing term | Sum assured falls and reaches zero at the end | A reducing home loan |
| Renewable term | Short term that can be extended; premium revised on renewal | Flexibility, at rising cost |
| Convertible term | Can be changed to another plan under stated conditions | Keeping options open |
| Group term | Provided by an employer or association | A top-up that ends with the job or membership |
| Dependants’ Protection Scheme | Up to S$70,000 to age 60, $55,000 from 60 to 65 | A base layer for CPF members |
MoneySense notes that the premium on renewal is often not guaranteed. A five-year renewable plan that looks cheap at 30 will be repriced at 35, 40 and 45.
The Dependants’ Protection Scheme
The Dependants’ Protection Scheme is term insurance for CPF members, administered by Great Eastern Life. According to CPF Board, yearly premiums run from $18 at age 34 and below to $298 from 55. Great Eastern says they are paid from CPF savings. It ends at 65.
The Home Protection Scheme
If you use CPF to pay the instalments on an HDB flat, you are usually also insured under the Home Protection Scheme, a decreasing term cover that clears the loan. See how to compare mortgage insurance.
What a Term Policy Pays For, and What It Does Not
Usually covered: death and terminal illness. Most products also cover total and permanent disability (TPD), though MoneySense says definitions of disability and payment schedules vary across products and insurers.
Added by rider: critical illness, and sometimes other benefits, for extra premium. A rider that “accelerates” the base policy pays part or all of the sum assured early, which reduces what is left for a later death claim. Our critical illness insurance guide explains this.
Not covered: hospital bills. That is the job of MediShield Life and Integrated Shield Plans. Nor does a term policy pay monthly income if you are too unwell to work but not totally and permanently disabled; see disability income insurance.
Read the TPD definition and the age at which TPD cover ends. Under Direct Purchase Insurance, for example, MoneySense says TPD cover stops at 65 even where death cover runs longer.
How Much Cover, and for How Long
MoneySense’s Basic Financial Planning Guide offers a rule of thumb of 9 times annual income for death and TPD, and suggests spending at most 15% of income on insurance protection.
A rule of thumb is a starting point. A more careful sum looks at what would actually be lost.
Take an illustrative parent earning $60,000 a year with a $300,000 home loan and two children aged 3 and 6.
- 9 x $60,000 = $540,000 on the rule of thumb.
- A needs-based check: clear the $300,000 loan, plus $2,500 a month for the family for 15 years ($450,000), gives $750,000 before counting savings and existing cover.
- With $150,000 in savings and $70,000 of DPS, the needs-based gap is about $530,000.
The two methods land close together here. They will not always. This is an illustration only, not a recommendation; the protection gap calculator lets you use your own numbers.
On the term: MoneySense’s advice is to choose the coverage term carefully, and to consider a longer period of protection while you are younger. The usual anchor is the year your youngest dependant becomes financially independent, or the year the home loan ends.
The short version: Term life insurance buys a fixed sum assured for a fixed number of years and nothing else. It has no cash value, which keeps premiums low. The two decisions that matter most are how much and until when.
Ways to Buy Term Insurance
- Through a financial adviser representative. You get advice on your needs, and the cost of distribution is built into the premium.
- Direct Purchase Insurance. MoneySense says term DPI offers $50,000 to $400,000 of cover per insurer, bought without advice and without commission.
- Group schemes. Employers and some associations offer group term cover. It is often inexpensive, but it is not yours to keep if you leave.
Whichever route you take, compare the same sum assured and term across insurers on compareFIRST. Our article on how to compare term life insurance walks through it.
Risks and Limits to Know
- Lapse. Miss premiums and cover ends. Reinstating may need fresh underwriting, MoneySense notes.
- Health changes. A new policy bought later is priced on your health then, and conditions you have developed may be excluded.
- Under-insuring to save premium. A low premium on too small a sum assured does not solve the problem the policy was bought for.
- Insurer failure. The Policy Owners’ Protection Scheme run by SDIC protects guaranteed benefits of life policies: up to $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
- Log in to the CPF website to see whether you have DPS, and for how much.
- List your debts, dependants and the years each will rely on you.
- Estimate your gap with the protection gap calculator.
- Compare like-for-like quotes on compareFIRST before speaking to anyone.
- If someone has proposed a plan, test it with the recommendation scorecard.
