Frequently Asked Questions


General

1) What is Direct Purchase Insurance (DPI)?

DPI is a class of simple term and whole life insurance products that you can buy directly from life insurers. As DPI are sold without financial advice and no commission is charged, you pay lower premiums than comparable life insurance products. Unlike other life insurance products that you have to purchase through a financial advisory representative, you may purchase DPI – which can be identified by the prefix “DIRECT” in their product name – directly from insurer through their customer service centres or websites (if available).

2) What is the objective of introducing DPI?

DPI caters to consumers who know their insurance needs and who may prefer to purchase life insurance products without receiving advice.

As DPI may be bought without financial advice, you will not have to pay the commissions otherwise due to a financial advisory firm and its representative. DPI is relatively cheaper compared with other similar life insurance products.

3) What is the difference between DPI and non-DPI?

DPI is sold without financial advice, i.e. consumers can purchase DPI directly from an insurer without going through a financial advisory (FA) representative. This is different from other life insurance products which are sold through FA representatives. As DPI is sold without financial advice, no commissions are charged. As such, a consumer pays lower overall premiums for DPI as compared to a similar non-DPI product.

DPI is also unique in that their features are broadly standardised. For example, features like policy coverage period, total and permanent disability benefits and critical illness benefits will be common across all insurers.

But, the terms and conditions of DPI vary among insurers. Do read the terms and conditions carefully, particularly the exclusion clauses, so that you are aware of how they will impact you.

4) What are the types of DPI offered?

There are two main types of DPI available:

(a) Term life with total and permanent disability (TPD) cover and an optional critical illness (CI) rider; and
(b) Whole life with TPD cover and an optional CI rider.

5) How can I purchase DPI?

You may purchase DPI directly from the insurer through the following channels:

a) Customer Service Centre

Identify the insurer you wish to purchase DPI from and visit its customer service centre to obtain an application form. The customer service officer can assist you with the completion of the application form but you will not be provided with any financial advice. If you wish to obtain financial advice, you may approach any of the insurer’s sales representatives. However, you may be charged a fee or commission for the advice provided.

b) Online Channel

If you wish to buy DPI online, please check whether the insurer you wish to purchase DPI from offers them online. If so, you may access the website of that insurer to purchase DPI directly. Please note that not all insurers have made available the sale of DPI online.

6) How much are the savings from purchasing DPI?

The exact amount of savings would vary among products and insurers. However, there would be cost savings to consumers as DPI is sold without any commissions.

7) Are all insurers selling DPI?

All life insurers catering to retail consumers offer DPI through their customer service centres. Some insurers also offer DPI online through their websites. Please visit the Life Insurance Association, Singapore website at www.lia.org.sg for the contact information of the insurers and a list of the locations where you can purchase DPI.

Features and Benefits

8) Should I buy a term life or whole life DPI?

It is important to understand the differences between a term life DPI and a whole life DPI before you decide on the product that best suits your needs.

A term life policy provides insurance protection for a fixed period of time and is suitable if you wish to provide for your dependants until they become self-reliant. There will be a payout if you pass away, or suffer a terminal illness or total and permanent disability (TPD) during the coverage period. Terminal illness is the conclusive diagnosis of an illness that is expected to result in death within 12 months, while TPD is the complete inability to engage in any business/occupation, or total and irrecoverable physical loss, due to accident or sickness.

As term life products are pure protection policies with no savings or investment feature, they are cheaper than whole life products. However, this also means that there is no cash value when the policy expires, or if you end the policy early.

A whole life policy provides life-long insurance protection. You or your loved ones can expect to receive a payout when you pass away, suffer a terminal illness or TPD - no matter when that happens. It is suitable if you wish to provide for your dependants for the rest of your life and maintain the potential to grow your savings at the same time. This is because whole life policies have a savings and investment element.

Whole life products are typically more expensive than term life products as premiums are invested to build up cash value in addition to paying for insurance coverage. If you end the policy early, there may be a cash value (known as the surrender value). However, there may be no cash value if you end the policy in the first few years as most of the premiums are used to pay for the initial administrative expenses incurred by the insurers for setting up the policy.

9) To what extent is DPI standardised? Does every insurer offer exactly the same DPI?

The features of DPI have been broadly standardised, as follows:

(a) Policy coverage period for term life DPI :

• 5 years (with renewability feature)*

• 20 years*

• Up to age 65

(b) Death, terminal illness , total permanent disability (TPD) and critical illnesses (CI) benefits: 100% of sum assured, with standardised definitions for TPD and the 30 CIs covered**

(c) Only participating products are included as whole life DPI

(d) Premium payment period for whole life DPI***:

• Payment up to age 70

• Payment up to age 85

(e) Premiums:

• Guaranteed^ and level ^^ for term life and whole life DPI over the policy term

• Non-guaranteed for accelerated CI riders^^^

(f) Minimum entry age: 18

(g) Maximum entry age: 60 or 65 depending on the type of DPI purchased

(h) Minimum sum assured: $50,000, for whole life or term life DPI

(i) Maximum sum assured: $400,000, with a sub-limit of $200,000 for whole life DPI, on a ‘per life insured per insurer’ basis

* TPD and Optional CI benefits cover up to age 65; Death and TI benefits cover up to age 85

** 10% sum assured or $25,000 whichever is lower, for Angioplasty & Other Invasive Treatment for Coronary Artery

*** TPD benefits cover up to age 65; Death, TI and Optional CI benefits cover for whole of life or up to a specified maturity age (e.g. 99)

^Guaranteed premiums mean that the insurers will not increase the premiums payable throughout the premium payment term of the policy.

^^Level premiums mean that the premiums you pay will remain the same throughout the premium payment term of the policy.

^^^Upon contracting a CI, the CI benefits will be paid out and the main policy will lapse

While most features have been standardised, consumers should be aware that the terms and conditions of the DPI of respective insurers are different. These may include differences in age definitions, TPD benefits, and exclusion clauses. The benefits, such as non-guaranteed bonuses and surrender cash values of participating whole life DPI, may also differ among insurers.

10) What are the features of DPI that are not standardised

a) Age definition

Insurers use different definitions for your age. The age definition determines when premium payment and/or insurance coverage ends and is factored into the calculation of how much annual premium is payable.

For example,

For the term life DPI that covers up to age 65

Birth date of policyholder: 1 March 1980; turns 65 on 1 March 2045

Commencement date of policy: 1 June 2014

b) Bonuses and cash values of whole life DPI

Whole life DPI is participating in nature i.e. it provides non-guaranteed benefits determined based on the performance of the insurer’s participating fund. Such non-guaranteed benefits, together with the cash values under the whole life DPI, vary by insurers. Please refer to the Product Summary and Benefit Illustration of the specific whole life DPI for more information.

c) Coverage period (for whole life DPI)

Insurers may either set a maturity age (e.g. age 99 or 100) when all benefits will be paid out, or pay the benefits only upon death or diagnosis of a terminal illness, even if this occurs beyond age 99 or 100.

d) Premiums for total and permanent disability (TPD) coverage

The coverage for TPD lasts up to a maximum age of 65.

The premiums that you pay may or may not change throughout the premium payment period, depending on how the insurers price the TPD coverage.

(a) If the TPD coverage is priced separately from the main policy, the premiums you pay for the policy will be reduced once TPD coverage ends after age 65.

(b) If the TPD coverage is priced as part of the main policy and spread out equally over the entire premium payment period, the premiums you pay for the policy will remain the same even though TPD coverage ends after age 65.

e) Exclusion clauses

Different insurers may have different exclusion clauses which state the situations when benefits under the insurance plan are not payable, in their policy contract. You should read the product summary and policy contract to find out what these exclusions are and whether the product still meets your needs.

11) Why are only term life and participating whole life insurance products included in DPI?

These are common life insurance products that serve the basic protection needs of the majority of Singaporeans. We have excluded other life insurance products, such as investment-linked and endowment policies as they have relatively higher investment or savings components.

12) Why are standalone critical illness (CI) products excluded from DPI?

They are relatively more expensive than CI riders and are less popular with consumers. Optional CI riders are offered for DPI so that consumers can choose whether to purchase a CI rider with their DPI main policy.

13) What is the difference between terminal illness benefits and critical illness (CI) benefits?

Terminal illness refers to the conclusive diagnosis of an illness that is expected to result in death within 12 months. This diagnosis must be supported by a specialist and confirmed by the life insurer’s appointed doctor. The terminal illness coverage period will be the same as the death benefit coverage period.

On the other hand, CI benefits will be paid out once you are diagnosed with a CI covered under the insurance policy. The CI may or may not be expected to result in death within 12 months. If you choose to purchase a CI rider attached to a term life DPI, you will be covered for CI up to a maximum age of 65. If the rider is attached to a whole life DPI, you will be covered for CI for the whole of your life or up to a specified maturity age (e.g. 99).

The list of 30 CIs is as follows:

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

25. Viral Encephalitis

26. Bacterial Meningitis

27. Angioplasty & Other Invasive Treatment for Coronary Artery

28. Blindness (Loss of Sight)

29. Major Head Trauma

30. Paralysis (Loss of Use of Limbs)

For more information on the definitions of these CIs, please refer to website link. You should also refer to the policy contract for the specific definition of each CI as you will receive a payout only if the illness falls within the definition stated in the contract.

14) Why does the critical illness (CI) rider for my DPI only cover 30 out of the 37 CIs listed on LIA website?

These 30 CIs are the most commonly offered CIs by insurers and account for about 98.5%1 of claims in Singapore.

1This percentage is extracted from the 2012 Dread Disease Survey report prepared by the General Reinsurance Corporation

15) Should I buy a critical illness (CI) rider for my DPI?

Once you have chosen a term or whole life DPI, you may choose to add a CI rider. The CI rider pays out the full coverage amount of the main term or whole life policy in a lump sum either when you are first diagnosed with a CI or after you have undergone surgery covered under the rider (except for Angioplasty2). This payout will ease your financial burden as your treatments and medication can be costly. Your income may also be affected if you suffer a CI as you may not be able to work. The main policy, together with the CI rider, will end once the coverage amount is paid out under the CI rider.

2 The CI rider will only pay out 10% of the coverage amount of the main policy or $25,000 whichever is lower, for Angioplasty and other invasive treatment for coronary artery. After the insurer pays out the above, the remaining coverage amount for the main policy and CI rider continues to be in effect.

16) Can I buy a critical illness (CI) rider with a different coverage amount from my term life DPI or whole life DPI policy?

No, you are not able to. The CI rider is an optional add-on that pays out the sum assured of the main whole life DPI or term life DPI policy once you are diagnosed with any of the CIs (except for Angioplasty) covered by the rider. For a whole life policy, the payout will also include the bonus accumulated in addition to the sum assured. Upon the payout of the sum assured, the whole life or term life policy will be terminated. As such, the amount of coverage provided by the CI rider will be the same as the sum assured of the main whole life or term life policy.

However, upon underwriting or due to the maximum overall CI coverage amount imposed by individual insurers, insurers have the right to provide a lower CI rider coverage amount than the term or whole life policy.

If you are diagnosed with the CI condition of Angioplasty, only 10% of the sum assured subject to a maximum of S$25,000 will be paid out. In this case, you will continue to enjoy the protection provided by the term or whole life policy based on the remaining 90% of sum assured, which will be paid out once the next event occurs (i.e. upon death, TPD, terminal illness or diagnosis of any of the other covered CIs).

17) How do I choose between the two premium payment periods offered for whole life DPI?

You may choose to pay premiums for your whole life DPI up to age 70 or age 85.

If you choose to pay until age 70, you will need to pay higher premiums every year, but the total amount paid over the entire premium payment period will be lower.

If you choose to pay until age 85, you will pay lower premiums every year, but the total amount paid over the entire premium payment period will be higher.

Consider if you can afford to pay the premiums until the age you have chosen, taking into account the fact that you are not likely to be earning any income after you retire.

18) How do I choose among the three coverage periods offered for term life DPI?

You may choose from three different coverage periods for your term life DPI:

• 5 year renewable;

• 20 years; or

• Term up to age 65.

A 5-year renewable term life policy may be suitable if you prefer shorter coverage and the flexibility to renew your policy. The premiums may be higher at the point of renewal due to your age, but any medical conditions uncovered since the start of the policy will continue to be covered after the renewal.

The other options are a term policy for 20 years, and a term policy to cover you up to age 65. These may be suitable if you prefer longer coverage.

As your dependants will not benefit from the policy’s coverage after it expires, you should consider the age of your dependants when choosing the coverage period.

19) Why is there a maximum sum assured cap on DPI?

The maximum sum assured cap serves to mitigate the risk of consumers buying DPI beyond their means and protection needs as such products are bought without financial advice.

20) What is the maximum sum assured quantum and how does this quantum work?

The maximum sum assured for DPI is set at $400,000, on a ‘per person per insurer’ basis. This means that the coverage you can get from each insurer is capped at $400,000.

There is also a sub-limit of $200,000 for whole life DPI, to reduce the risk of consumers buying whole life products beyond their means and protection needs. Again, this sub-limit is on a ‘per person per insurer’ basis.

The following scenarios illustrate how the cap of $400,000 for DPI and sub-limit of $200,000 for whole life DPI work.

Scenario 1:

If you have previously bought a term life DPI with sum assured of $300,000, you may buy an additional term or whole life DPI with sum assured of $100,000 from the same insurer.

Scenario 2:

If you have previously bought a whole life DPI with sum assured of $150,000 from an insurer, you may buy another whole life DPI with sum assured not exceeding $50,000 from the same insurer. Alternatively, you may also buy another term life DPI with sum assured of $250,000 from the same insurer.

If you require protection of more than $400,000, you can buy additional DPI from a different insurer. The acceptance of your application for insurance would be subject to financial and medical underwriting by the insurers.

21) Does the maximum sum assured cap include the coverage from the critical illness (CI) rider?

As the CI rider is an optional add-on with the same sum assured as the main whole life DPI or term life DPI policy, it is subject to the same maximum sum assured cap as the main policy.

Assistance and Safeguards

22) What if I want financial advice in purchasing DPI?

If you require financial advice, you may approach a financial advisory representative for advice. However, you may be charged a fee or commission for the advice provided.

23) Who should I contact if I need to make a claim?

If you require assistance in making a claim, you should contact the insurer directly.

24) Who should I speak to if I have concerns after buying the DPI?

If you require any assistance after buying the DPI, you should contact your insurer directly. You will also enjoy a 14-day free look period from the date on which you receive the policy documents. The premiums paid will be refunded to you without interest should you cancel the policy within this period. However, you will have to bear the cost incurred for any medical examination done as part of the application for this policy.

Others

25) How does Medishield Life differ from DPI?

Medishield Life is a basic health insurance scheme that aims to provide lifetime health insurance coverage for large hospitalisation bills for all Singaporeans. In contrast, DPI caters to the primary protection and life insurance needs of Singaporeans.