A regular exercise regimen, shedding a few extra kilograms and eating right – if any of these are among your New Year’s resolutions, you’re in good company. After all, there’s nothing like a fresh start to help you set the year straight and get things in order.

It’s also the perfect time to take stock of your life and plan ahead to consider insurance needs for yourself and your loved ones. The past few years have been rough on most people, with Covid-19, inflation and economic instability throwing future plans into disarray.

To alleviate your concerns, life insurance can go a long way towards offering you and your family financial security in the event that something untoward should happen to you. Best of all, there are two key types of plans for those with different budgets: term life insurance and whole life insurance. While both offer life insurance protection, they have very different features. Here’s what you should know to help you with making a decision:

What’s covered?

Whole life and term life insurance broadly offer the same types of protection, although details can vary from plan to plan.

To this end, they generally provide protection from death, paying out a lump sum to loved ones in the event of the policyholder’s demise. Many plans also offer coverage for total and permanent disability and/or terminal illness, and critical illness coverage is sometimes offered through an optional rider.

Protection may vary or be customisable depending on the plan, so it is important to look at the details of each policy you are considering.

Perhaps one of the most significant differences is the duration of protection. Term life insurance offers protection up to a specific term or age. For instance, such a plan might offer coverage for 5 or 10 years, or up to ages 65, 75 or 85.

In contrast, whole life insurance offers coverage up to the end of life or an advanced age, most commonly 99.

Do I get any cash back? 

With term life insurance, the sole purpose of the plan is to offer insurance protection. As such, when the policy term ends, there is no cash value accrued for the policyholder. 

Whole life insurance, on the other hand, offers accumulation of cash value over time as part of the premium is invested. Because of this, such plans require longer-term commitment.

Thanks to the accumulation of cash value, whole life insurance can also be used for wealth accrual purposes. Hence, some choose to use whole life insurance as a way to accumulate money for long-term savings or future financial goals, at the same time enjoying life insurance protection while the plan is still in force.

Which plan to choose?

One of the most important things to consider is cost, since it may not be prudent to stretch yourself financially. If you’d like insurance protection that’s easier on the pocket and for a defined period of time, term life insurance may be more suitable for you.

This is because you’re just paying for the protection you need, without the wealth accumulation aspect. It’s also appropriate for those who wish to receive life insurance protection only for a fixed period, such as until their children become financially independent. It can thus be a shorter-term commitment than whole life insurance, which is great if you do not think you need lifelong protection.

In contrast with term life insurance, whole life insurance offers protection together with wealth accumulation and costs more overall.

Whole life insurance is suitable for those who have the means to commit to a plan long term, can afford the higher premiums and for whom the wealth accumulation feature would be a welcome addition to their financial portfolio. It gives the assurance that you can stay protected for life if you wish, and can also help you accumulate money for long-term savings or future financial goals.

For instance, Manulife’s LifeReady Plus (II) offers long-term protection with flexibility. The plan gives policyholders the option to convert cash value into annual payouts¹ over 10 years, with an additional 5 per cent interest after the enhanced protection expires at age 70 or 80. Such a plan serves the dual purpose of offering life insurance protection, while at the same time being a potential component of one’s long-term savings.

The plan also offers a retrenchment benefit which waives premiums for six months if the policyholder or his or her spouse gets retrenched before age 65, which can offer peace of mind in an uncertain job market.

What if you want whole life protection with the wealth accumulation aspect but can’t put aside the money for it right now? If finances are tight at the moment, you can opt for a term life insurance plan like Manulife’s ManuProtect Term (II), which can be converted to a whole life insurance plan later on. That way, you can get the protection you need right away, and start to benefit from the wealth accumulation feature of a whole life insurance plan later on when you have more cash on hand.

In nutshell, to determine whether term life or whole life insurance would better meet your needs, ask yourself how much you can afford to pay, whether you only want insurance protection or could also benefit from wealth accumulation, and whether you need protection for a specific term or all your life.

¹ Option is only available after the enhanced protection expires at age 70 or 80, and can only be exercised once. Annual payout will result in coverage reduction and lower cash value when the policy matures.

Find out more about Manulife’s life insurance plans here.

Important Notes

These insurance products are underwritten by Manulife (Singapore) Pte. Ltd. (Reg. No. 198002116D). This advertisement has not been reviewed by the Monetary Authority of Singapore. Buying a life insurance policy is a long-term commitment. There may be high costs involved if you terminate the policy early, and your policy's surrender value (if any) may be zero or less than the total premiums paid. Buying health insurance products that are unsuitable for you may affect your ability to finance your future healthcare needs.

This article is for your information only and does not consider your specific investment objectives, financial situation or needs. It is not a contract of insurance and is not intended as an offer or recommendation to purchase the plan. You can find the full terms and conditions, details, and exclusions for the mentioned insurance product(s) in the policy contract.

This policy is protected under the Policy Owners’ Protection Scheme which is administered by the Singapore Deposit Insurance Corporation (SDIC). Coverage for your policy is automatic and no further action is required from you. For more information on the types of benefits that are covered under the scheme as well as the limits of coverage, where applicable, please contact us or visit the LIA or SDIC websites (www.lia.org.sg or www.sdic.org.sg).

We recommend that you seek advice from a Manulife Financial Consultant or our Appointed Distributors, or visit any DBS/POSB Branch before making a commitment to purchase a policy.

Information is correct as at Jan 27, 2023.