Mrs Girija Varadarajan
A Father or a Husband instead of Fearing about the unexpected calamities that may fall upon his family members, should be prepared by ensuring some insurance plans.
What is needed is a concrete action by the prudent father or a husband to secure protection for the family against such a calamity. If ensuring the financial protection to the family is the most significant concern, the most appropriate solutions is Term Life Insurance. In this, The critical words are ‘Life” and “Term” .
Life Insurance means that this plan pays the Insured Sum, in case of Death of the Life Assured. Term refers to the number of years over which the cover remains active. This refers to a definite pre-agreed period / duration, determined at the commencement of the cover.
In simple words, a Term Life Insurance pays a lump sum amount to the beneficiary when the person whose life is insured dies. Such a death must occur within the pre-agreed defined duration (called the Term).
The sum to be paid is a pre agreed amount and this is known as “Sum Assured”. Such a sum is chosen by the person who wants his / her life to be covered.
The cause of death can be sickness or accident.However, this death must occur within the duration agreed at the time of commencement of the policy.
Most of the Term Insurance policies now available pays the Sum Assured in case of the following unfortunate events
• Death
• Total Permanent Disability.
• Terminal illness
The term chosen at the time the policy commences is decided by the person who is being insured. In Singapore, the maximum age upto which one can buy term life insurance is till he/she is 85 years old. Beyond age 85, Term Life Insurance is not available (other Life Insurance policies are available beyond age 85).
While it is possible to have term life insurance cover till one reaches the age 85, it is normally considered prudent to have the term as a minimum till the last child in the family reaches age 25. This is to ensure that the education of the children in the family is not disrupted due to the sudden premature death of the sole bread winner in the family.
The sum assured is arrived at in a simple calculation. The SA is normally chosen to provide for about 10 -15 years of the yearly expenses, which the family might need to maintain a decent living standard, should the bread winner die or become disabled. It is expected that by that period some alternate arrangements could be in place for the family. This is a general simple thumb rule. However, in realty, the person to be insured chooses the Sum Assured based on the needs of the individual family requirements.
Most of the Term Life Insurance in Singapore comes with a Rider called “Premium Waiver”. In case the Life Assured gets diagnosed to be suffering from any one of the listed 36 Critical Illness, from then onwards, the premium for the main policy will be waived; but the main policy will still be in force even though no premium is paid.
LIST OF 36 CRITICAL ILLNESS:-
1 Major Cancers
2 Heart Attack of Specified Severity
3 Stroke
4 Coronary Artery By-pass Surgery
5 Kidney Failure
6 Aplastic Anaemia
7 End Stage Lung Disease
8 End Stage Liver Failure
9 Coma
10 Deafness (Loss of Hearing)
11 Heart valve Surgery
12 Loss of Speech
13 Major Burns
14 Major Organ / Bone Marrow Transplantation
15 Multiple Sclerosis
16 Muscular Dystrophy
17 Parkinson’s Disease
18 Surgery to Aorta
19 Alzheimer’s Disease / Severe Dementia
20 Fulminant Hepatitis
21 Motor Neurone Disease
22 Primary Pulmonary Hypertension
23 HIV Due to Blood Transfusion and Occupationally Acquired HIV
24 Benign Brain Tumour
26 Bacterial Meningitis
27 Blindness (Loss of Sight)
28 Major Head Trauma
29 Paralysis (Loss of Use of Limbs)
30 Terminal Illness
32 Apallic Syndrome
33 Systemic Lupus Erythematosus with Lupus Nephritis
34 Other Serious Coronary Artery Disease
35 Poliomyelitis
36 Loss of Independent Existence
The premium remains constant during the term, as against the very realistic scenario that the earning capacity of the Life Assured increases, many fold over the term. Thus, the premium becomes more affordable as the years go by.
The most important point to be noticed is that there is no return on the premium paid. There is no savings or investment feature, so there is no cash value if the policy ends or is terminated prematurely. Thus there is no Maturity Benefit or Surrender value associated with Cash Value in the case of such a Term Life Insurance policy.
Another important point to be noticed is that the cover is available only within the term – not thereafter.
This type of term life policies come with very low premium when compared to policies which provide cover for death and also have a return on premium. Thus, these are very popular when protection is the main concern.
Term insurance is typically the least expensive way to purchase a substantial death benefit on a coverage amount per premium dollar basis over a specific period of time.
For policies with large sum assured (example 1 million) the person to be insured must undergo a medical examination . Similarly, if the age at the entry time is above 40 there can be Medical examination. In general, the sum assured and the age at the time of policy commencement, determine the need on medical examination.
Term Life Insurance is such an important one that the Singapore Gov. has introduced a compulsory life insurance plan for all members contributing to CPF. This is called Dependant Protection Scheme.(DPS) . Maximum sum assured under DPS is S$46,000, as of today. DPS works on an automatic opt-in basis. Unless you opt out, the annual premium is automatically deducted from your CPF account. The scheme is extended to CPF members when they make their first contribution to CPF. The maximum age up to which the cover is available is 60 only under DPS.