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A First-Timer's Guide to Life Insurance

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A First-Timer's Guide to Life Insurance

What’s the purpose of a life insurance policy? Do I need it if I’m young? Can I buy it when I’m old? How much coverage do I need? While you may have a life insurance policy, there is a possibility you are not making the most out of it and are underinsured.

We answer the most frequently asked questions when buying life insurance.

If you are looking for information on General Insurance, click here to check out our First-Timer's Guide to General Insurance!

What is the purpose of a life insurance policy?

A life insurance policy provides protection against the financial impact that a person’s family may experience in the event of that person’s passing OR a Total & Permanent Disability (TPD)

Those insured will receive a payout that can be used to cover:

Immediate expenses
The loss of income
The payee's debt

What are the Different Types of Life Insurance Policies Available?

TERM INSURANCE

A term life insurance provides coverage for a set period (the “Term” of coverage)
It has the least expensive insurance premium for people under the age of 50
It is the most basic insurance policy with no cash value (i.e. no returns on maturity/surrender of policy)

WHOLE LIFE INSURANCE

A whole life insurance provides coverage throughout a person’s lifetime
Premium payments are higher than term life policies, but premiums do not increase with age
It offers a guaranteed cash value/return upon maturity or surrender of policy
You can build tax-deferred cash values with whole life insurance (i.e. only pay the tax on the insurance in the future)

INVESTMENT LINKED INSURANCE

An insurance plan that also has short/long-term investment capabilities
Premium payments are divided between payment for the life insurance and investments in funds that you can choose
You can also invest more when you have extra money or withdraw from your investment funds if required

What is a Takaful Plan?

Takaful is a type of protection plan which abides by Islamic or Shariah rules on finance. Members contribute money into a pooling system in order to guarantee each other against losses or damages incurred. One type of Takaful plan is investment-linked takaful, which allows members to participate in investment opportunities while also receiving protection.

What affects my insurance premium?

A premium is the payment you make periodically for your insurance policy
Certain factors affect the amount of premium you pay for your insurance:

AGE

The younger you are when you purchase the life plan, the more affordable it will be

RISK OF OCCUPATION

High-risk occupations have a higher premium tied to it

HEALTH CONDITION

Certain factors such as smoking, BMI, etc will affect your eligibility and premium rates

TYPE OF POLICY

Your premiums will depend on the length of your policy term and the amount that you are covered for

How do I calculate how much coverage I need?

The amount you are covered for is set at your time of purchase but can be adjusted as you grow in age
As a rule of thumb, you should reassess your coverage if your lifestyle has changed, for example, if you recently got married or have a child on the way
Input your details below to find out your ideal recommended coverage