Should you get a term plan till 99? Term plans are often used to provide insurance coverage for a specific need for a fixed period, e.g. death coverage for 20 years. With the evolution of term plans in the market, there has been an increase in the age limit for term plans, and there are now numerous options that offer coverage for death up to age 99/100 (we will refer to them synonymously here). Given that most people would not need death coverage in old age, why would someone get a term plan that covers death till 99?
The image is taken from singstat.gov.sg
The main reason would be that the odds of making a claim and “encashing” on the policy are foreseeable. Moreover, the premiums for such a plan are relatively inexpensive. The life expectancy for a Singapore resident is roughly around 82 for males and 85 for females respectively. Given that this is the expected age that one passes away, it would seem to be a sure bet that the policy would pay off if you get a term plan till 99.
You may expect that given the probability of a claim, the premiums for such a term plan till 99 would be costly. However, we found that this is not necessarily true. The median premium for a term plan till 99 that covers for 1mil death coverage for a 30-year-old male non-smoker is about $3k a year. This means that for a coverage term of 69 years, the maximum premium payable is about $207k for a potential payoff of $1 million. If you consider the life expectancy of 82yrs, the expected total premium payable for 52 years is about $156K for the same payoff of $1 million. In fact, the “return” becomes more attractive the earlier you pass on.
For those who are concerned about the possibility of living past 99, there are also options that guarantee the death benefit if you are still alive at 99. This effectively means that you will receive the sum assured regardless of how long you live.
Pros of getting a term plan till 99
- Lower premiums as compared to a whole life plan, more affordable way to get coverage
- High probability of claiming and making a ‘profit’
- Premiums are guaranteed and do not change
- Can stop any time with no loss of cash value
Cons of getting a term plan till 99
- There is no cash value in the policy, and you may not get anything back if there is no claim
- You need to keep paying either until you claim or until age 99
- There is a chance that you may live past 99 and hence do not get to make a claim
To find out which are the most competitive options for term plan till 99
To know more about the probability of claiming a term plan till 99
To understand how you can integrate term plan till 99 with other wealth planning strategies to maximise your risk-adjusted return
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Besides term plan till 99, you may also explore one of the more popular whole life insurance here.