While term insurance offers protection over limited periods, permanent protection is provided by whole life policies. A whole life policy offers lifetime insurance coverage against death and total permanent disability with the added saving angle.
In a whole life policy, the insurance company will pay the sum assured as well as accumulated bonuses upon death of the policyholder. A whole variety of whole life policies exist in Singapore though they noramlly vary in two main aspects - the duration of payments and whether the policy participates in the profits of the insurance company.
There are two variations as to how long you need to pay for your life policy namely on a continuous premiium basis or on a limited payment basis. The continuous-premium whole life policy requires individuals to pay a fixed premium until they die or exercise a non-forfeiture right. Of the variety of whole life insurance policies available, these policies offers the greatest amount of permanent death protection and the least amount of savings per dollar of premium paid. Thus the emphasis is on death protection and is the smart policy to the bank on when filling a permanent life insurance need. Limited payment whole life policies offer coverage for the entire lifespan of the insured but schedules the payments to end after a period of time.
Whole life policies come with two options, the non-profit whole life policy and the with-profit whole life policy. The difference is that whole life policy has bonusese added onto the basic sum assured from time to time, and by maturity date these can add up to a very substantial sum which can far exceed the sum assured itself. The size of bonuses depend on the investment performance of the insurance company. It is important to note that such policies can be a good hedge against inflation. This is in contrast to the non-profit policyholder who is only entitled to the sum assured.
