Wednesday, December 05, 2007

Term Insurance is guaranteed for the duration

Dear Mr. Tan

Is Term insurance subject to review on renewal, e.g. for some health condition, they don't insure?

REPLY:

The Term insurance is guaranteed to be renewable at the same premium rate for the entire term, regardless of your future state of health. If you take a Term insurance to age 65, the renewability is guaranteed to 65.
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2 comments:

Anonymous said...

Hi, Mr. Tan, How about living rider? Is it guranteed return also?

December 05, 2007 7:59 PM
Priyadi said...

"The Term insurance is guaranteed to be renewable at the same premium rate for the entire term, regardless of your future state of health. If you take a Term insurance to age 65, the renewability is guaranteed to 65."

not just for the entire term, some (most?) term life insurance also have guaranteed renewability clause that extends to the next term.

for example, if you buy 5 year term insurance, you will have the option to renew it for the next 5 years, unconditionally, even if you are dying. the insurance company doesn't have the right refuse your renewal. the premium rate will increase according to the price written in the policy.

for this reason, i personally like shorter term rather than a longer term. 1 year decreasing term (yearly renewable decreasing term) is the best deal:

1. it is cheaper, you will have the choice to invest the differences aggresively. on the other hand, insurance companies probably do it conservatively.

2. you don't have to plan too far ahead. you can terminate the policy at any time without incurring a loss. level premium term means you are paying more than you are supposed to pay at earlier years. this is to compensate the increase of risk in later years. if you terminate the policy earlier, you will incur a loss because you already paid a portion of premium for later years. some insurance companies reimburse this fee, others do not. either way, accounting for time value of money, you are still losing potential income.

disclaimer: i'm not familiar with insurance products in singapore, so i might be wrong.

December 05, 2007 11:55 PM

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