Term or Whole Life – Which Should You Choose?

Is term insurance necessarily always better than whole life policies?

iFAST Insurance Team May 09, 2018 5304

A peace of mind - this is what life insurance can offer by protecting and providing for our dependents should anything unfortunate happen. A must-have for when we start a family or have dependents, life insurance is an integral part of our protection portfolio that is not to be missed.

To start planning for your protection, it is important to first determine how much coverage you lack. The next step would then be to decide on the type of life insurance of adopt. However with both term and whole life insurance available, do you know which would be more suitable? In this article, we share the 3 key considerations that you should have when deciding between term and whole life insurance.

(See "The 3 Best Policies For Every Life Stage")

#1 Duration for coverage

Whole Life
Period of coverage
Up to age 85
For life or up to the age of 99

Term insurance provides coverage for a specified period and is therefore commonly used for temporary protection. This allows you to remain insured until retirement age where you are likely to no longer have dependents reliant on you financially.

Alternatively, whole life insurance offers coverage for life or up to the age of 99. This allows you a peace of mind knowing that you will remain insured for the rest of your life. Additionally, for whole life policies that mature at the age of 99, a lump sum maturity benefit would be received should you outlive your policy.

With both types of life insurance offering different terms for coverage, determining your coverage duration would allow you to make your decision accordingly.

(See "Comparing Term Life Policies")

#2 Purpose

The next step would be to determine your purpose for obtaining life insurance.

A non-participating policy, term insurance does not accumulate cash values as it is solely intended for protection. As such, you should not expect to reap any returns upon maturity of the term policy.

On the other hand, whole life insurance is used for both protection and legacy. As a participating plan, the policy accumulates cash values which results in a higher surrender and/or death benefit. Therefore if you are looking to leave a legacy for your family, a whole life insurance may be suitable.

(See "Comparing Whole Life Policies")

#3 Cost

Lastly, when deciding between term and whole life policies, consider the amount that you are comfortable with setting aside each month for your protection policies.

With basic coverage for death and total permanent disability coverage, term insurance is perceived as a no frills plan. Therefore, it is the affordable option for life insurance with plans going from just $12.65 a month as shown in our previous article "Get $100,000 Term Coverage From As Low As $12.65 Per Month".

However, whole life insurance has a savings element embedded which allows the policy to accumulate cash values. Therefore, while whole life insurance may be pricier, it also allows for more flexibility as you may choose to surrender your plan to get money back or convert to a paid-up policy.

(See "How Much Should You Have In Your Emergency Stash?")

So then which should you purchase?

Ultimately, both term and whole life policies are life insurance that are meant to provide you with reassurance knowing that your loved ones can be financially secure should you meet with a mishap. Therefore as they are meant to be used for different intentions there is no "correct" policy. Instead, consider these 3 factors before making your decision based on the suitability of product.

(See "The True Cost Of Raising A Child In Singapore")

How FSMOne can help you get on track

Our team of friendly advisers are able to help you review your financial objectives, long term commitments, and offer you investment and insurance advice specific to your needs. If you would like assistance in reviewing your financial and protection portfolio, or simply to get a quote for an insurance plan,

Contact Our Advisors Here >

Available Products on FSMOne Insurance

Term Life, Whole Life, Critical Illness, Annuity, Health, Endowment

from Etiqa Insurance, Manulife, NTUC Income and Tokio Marine Life Insurance

*Please check with our advisory team if the product you want is available on FSMOne Insurance

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