So you’re thinking of getting life insurance, until you’ve hit a roadblock: between whole life insurance and term life insurance in Singapore, which should you get? While they have their similarities, both types of life insurance are structured pretty differently and cater to different needs.

Read on as we break down the pros and cons of term vs whole life insurance, and find out which type is more suitable for you. 

What is life insurance?

Whether it’s your elderly parents or the small family that you’ve just started, life insurance is a must if you’re looking to protect your family in the event that something unfortunate happens to you.

What it essentially does is offer a payout to help your family cope financially if the following occurs: 

• Death
• Total and Permanent Disability (TPD)
• Terminal illness 

In this regard, both term insurance and whole life insurance are similar. No matter which type you get, the sum of money that your family receives from your life insurance payout helps them cope with living expenses while also giving them time to get back on their feet.

But that’s about where the similarities end. 

What is term life insurance?

Think of term life insurance as the no-frills, straightforward option that just dives straight into what you need – providing a sum assured (read: payout) in the event of death, TPD or terminal illness. 

It provides pure coverage and is usually available only for a fixed term, which is also where its name comes from. You can choose to get coverage for just five, ten or twenty years or till you reach a specific age like 99 years old for example.

Because this is a protection-only type of plan, it’s cheaper than whole life insurance. 

What is whole life insurance?

Meanwhile, whole life insurance provides lifetime coverage for as long as you live, whether it’s up to age 85 or 120. Another key selling point is that it has a cash value component, whereby you can surrender your policy for cash after a specific period of time.

It is often seen as complicated due to many types of whole life plans available and the way payouts and cash value are calculated in each plan.

There is also usually a fixed payment duration, otherwise known as “limited pay” that allows you to pay for a specific number of years in exchange for lifetime coverage. This allows you to consolidate your premium payments upfront during your prime working years, so that you can relax and just enjoy the coverage when you get older.  

Pros and cons: Term vs whole life insurance

These are the key differences between term and whole life insurance.

To put it simply, the advantages of term insurance is that it is affordable and structured in a way that is easy to understand. You also have the flexibility of getting additional coverage as and when required with term insurance. The only con is that it doesn’t offer a cash value.

Meanwhile, whole life insurance offers lifetime coverage and an opportunity to grow your savings with its cash value component. However, it usually costs much more than term insurance and can be complicated due to its payout structure.

To decide which of the two is more suitable for you, you’ll need to consider your objectives and needs. 

Should you buy term life insurance or whole life insurance?

It all boils down to three things: your objectives, your coverage needs, and how much you can afford.   

What is your purpose of getting life insurance?

First up, why are you getting a life insurance policy? Is it to protect your family from the financial burden when something untoward happens to you, or is it part of your legacy planning or retirement plan?

If you’re looking at just protection, term insurance is the clear winner as it offers protection at a much more affordable price point. But if you’re looking for something more, it’s worth considering whole life insurance.

With its cash value, whole life insurance policies offer more than just protection. The payouts and bonuses you get from a whole life insurance plan can supplement your retirement income in the future, while the fact that it covers you for your entire life also means that your beneficiaries will receive a lump sum payout when you pass on. 

What type of coverage are you looking for?

Next, what type of coverage do you need and how long do you need it for? If you’re looking for lifetime protection, whole life insurance is your guy.

With term insurance, you may have to renew your coverage each time your policy expires. And the older you get, the more expensive your premiums will be.

With whole life insurance however, premiums are locked into your age at the point of purchase. This is also why it’s advisable to get your whole life insurance plan when you’re younger (and healthier), so that your premiums are also lower.  

However, if you want extra protection for just a specific period, term insurance gives you just that along with the flexibility to adjust your coverage. For instance, you might need more coverage when you have young children but not so much when you have retired and your children have become working adults. 

How much can you afford?

Whole life insurance may come with added perks but it is significantly pricier than term insurance. If you are a young adult without much disposable income, the savings you get from term insurance might make more sense for you.

You may have also heard of “buy term, invest the rest”. This is a strategy that advocates buying term insurance and using the savings from lower premiums for investment, for potentially better gains.

In that sense, your investment gains replace the cash value component that whole life plans offer, without you having to fork out pricey premiums. It also gives you a lot more flexibility in building up your retirement nest. However, how well this strategy works really depends on your investment decisions and how sound they are. 

Get a life insurance plan that meets your needs

Both whole life insurance and term insurance have their pros and cons. Term insurance is usually favoured because it is affordable, flexible and simple to understand. If you're looking for an excellent deal, consider Etiqa Essential term life cover. With this policy, you can enjoy up to 53% perpetual discount and up to S$2,500 cashback!

However, whole life insurance also has its unique advantages, such as cash value accumulation and locked-in premiums. By starting early with Etiqa Essential whole life cover, you can fully reap the benefits of cash value accumulating over the years, providing you and your loved ones with long-term financial security.

Deciding which life insurance plan is better for you really depends on your life stage, what you can afford and what you’re looking for in your policy. Let an Etiqa Assurance Manager guide you in choosing the plan that suits you better. As an added bonus, after your no-obligation review, you'll receive S$25 cash, providing you with even more value.