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​Life insurance: Comparing term and bundled products

Life insurance

29 Oct 2018 | 3 min. read

Life insurance products are usually categorised as either term (unbundled) or bundled plans. Which is right for you? Learn about the features of term and bundled insurance and the common types of plans in each category.

Key takeaways

  • Term insurance provides protection for a fixed period of time, and generally costs less.
  • Products that bundle a protection and an investment component generally cost more.
  • Products that have an investment component expose you to investment risk.

Choosing a life insurance policy

When it comes to choosing life insurance, you have many options. Before asking which product is right for you, ask yourself why you want to be insured. Knowing this will help you narrow down your search for a suitable policy.

Do you want to:

  • Provide for your loved ones when you are no longer around?
  • Reduce financial loss due to illness or injury?
  • Protect, save and invest your money for retirement?
  • Leave behind some money for your loved ones as part of your estate?

Life insurance products fall under 2 broad categories: for protection only, and for protection and investment.

For protection only

Term insurance

Term insurance is the simplest protection product that is usually the most affordable. It provides insurance coverage for a fixed period. An example of term insurance is the Dependants' Protection Scheme.

Buy term insurance if you only need protection coverage for a fixed period of time. For example, you want to be covered until your youngest child completes university or is financially self-reliant.

For protection and investment

Whole life policy (participating and non-participating)

Whole life insurance policies provide life-long protection and also build savings which are subject to investment risk.

Endowment policy

Endowment policies are often marketed as a form of savings to help you meet a specific financial goal, such as paying for your children’s education, or building up a pool of savings over a fixed term.

However, they're not like deposits. You may not get back what you put in. A small part of your payments will pay for the insurance coverage, while the rest is invested and subject to investment risk.

Investment-linked policy (ILP)

ILPs have both a life insurance and an investment component. Premiums are used to pay for units in the sub-funds of your choice. Some of the units that you buy are then sold to pay for insurance coverage and for other fees and charges, while the rest remain invested.

Annuity policy

An annuity provides a retirement income as it guarantees fixed payments at monthly intervals, for as long as the policyholder lives, or for a fixed period.

Riders

Riders may be offered to enhance the benefits of the original policy, e.g. coverage for critical illnesses. Additional premiums have to be paid for the riders and the premiums could increase with age.

See also: Participating versus non-participating policies

Term versus bundled products

Compare both types of products as each product fulfils a specific purpose. Decide what features and benefits match your needs and buy the product that best meets them.

Product Term Participating Whole Life Participating Endowment Non-Participating Endowment/Whole Life

Investment-Linked Policy (ILP)

Type Unbundled Bundled Bundled Bundled Bundled
Cost of premiums Most affordable  More than term  More than term  More than term  More than term 
Cash value Typically none  Yes. Cash value comprises guaranteed benefits and future non-guaranteed bonuses.
Surrender value of guaranteed bonuses may be less than the total cash value of the policy. 
 Yes, cash value comprises guaranteed benefits only.
There are no bonuses.

Yes, it depends on the performance of the sub-funds that you invested in.  

Investment Risk  None.  You bear investment risks of the non-guaranteed bonuses.  None.  You bear investment risks.
If the investment value cannot cover the insurance charges, you may have to increase premium payment or reduce the protection coverage.  to prevent the policy from lapsing.
Premium level Constant.
Premiums is revised upon renewal. 
  • Typically constant.
  • Premiums can be paid on a regular basis.


Many have flexible premium levels, subject to a minimum premium amount.  

Last updated on 05 Nov 2018