Are there any benefits to term life insurance?

When people in Singapore first hear about term life insurance, the reactions are often mixed. On one hand, the premiums look noticeably lower than whole life or investment linked plans of similar coverage. On the other hand, there is no cash value at the end of the policy term. If you stay healthy, continue working, and outlive the policy, you walk away without any payout, and that can feel like a poor trade. It is easy to think that the premiums could have gone into a savings plan or an investment instead.

This hesitation is understandable, especially because Singapore already has some built in protection through public schemes. The Dependants’ Protection Scheme, or DPS, is a government backed term arrangement that automatically covers many CPF members between certain ages once they start contributing. It offers a modest payout in the event of death, terminal illness, or total permanent disability. The Home Protection Scheme, or HPS, protects HDB owners who use CPF to service their loans, so that the outstanding mortgage can be paid off if the insured person passes away or suffers a serious disability before the loan is cleared. With these in place, many people wonder whether there are still meaningful benefits to buying additional term life insurance from private insurers.

To answer that question, it helps to be very clear about what term life insurance is built to do. Term life is a contract that focuses on a single purpose. If the insured person passes away or suffers a covered severe condition during a fixed period, the policy pays a lump sum to the beneficiaries. If nothing happens within that period, the coverage ends and the premiums are not returned. There is no savings component and no investment element. In return for that simplicity, term plans are usually far more affordable than whole life policies with the same sum assured, especially when you buy them at a younger age.

In Singapore, DPS already offers a very basic illustration of a term scheme in action. It covers CPF members up to a modest maximum sum, usually until about age 65, and the premiums are deducted from CPF savings rather than from cash. The idea is straightforward. If something unexpected happens, the payout helps dependants cope with several years of expenses, giving them time to adjust. Private term policies work on the same principle but with much more flexibility. You can choose higher sums assured such as 500,000 or 1 million dollars and you can choose a term that fits your life stage, such as coverage up to age 60, 65, 70, or for a fixed 20 or 30 year period. Insurers also allow you to add riders for critical illnesses or to design policies that mirror a mortgage, with coverage reducing as the loan balance declines.

Seen this way, one of the most important benefits of term life insurance is clarity. You are paying specifically for protection during the years when losing your income would be most damaging to your family. The premium is not trying to serve two functions at once. It is not split between risk coverage and long term savings. It is concentrated on transferring the financial risk of an early death or severe disability to the insurer.

The second major benefit is affordability that allows you to purchase enough coverage to matter. For a typical household in Singapore, the main financial risks involve loss of income and the burden of outstanding debts such as a housing loan. Imagine a 35 year old with a spouse, young children, a sizeable HDB mortgage, and parents who rely on some monthly support. If this person tried to cover everything purely with whole life plans, the premiums could quickly become overwhelming. In many cases, that leads to underinsurance, where individuals end up holding one or two small policies that would not come close to replacing several years of income.

Term life insurance addresses this problem by keeping costs lower and separating protection from wealth accumulation. Because the premiums do not need to fund a cash value, you can obtain a much larger sum assured for the same budget. That makes it possible to insure for amounts that reflect your true responsibilities instead of what you can afford within a bundled product. For many middle income families in Singapore, term insurance is the only realistic way to reach coverage levels that would genuinely stabilise the household finances after a severe event.

This links to another key benefit of term life insurance. It allows you to match protection to specific time frames in your financial plan. Most people do not need the same level of life coverage at every age. The years when you have toddlers or school age children, a large mortgage, and high work related expenses are very different from your late sixties, when your children may be working and your debts are much lower. Term policies recognise this changing landscape by letting you choose how long the coverage should last. You might decide that a policy should run until your youngest child is expected to complete university, or until your home loan is fully paid, or simply until the age when you expect to retire.

Whole life plans take the opposite approach. They are designed to last for life and to accumulate cash value that can be accessed later. That structure can be useful for estate planning, leaving a legacy, or covering very long term healthcare needs. However, it also means that part of your premium is directed away from pure risk protection and toward savings. If your immediate priority is to make sure your dependants can cope financially during your main working years, a pure term plan that focuses entirely on protection may align better with your goals. The presence of CPF Life, MediSave, and other retirement related schemes in Singapore further strengthens the case for reserving long term savings for dedicated retirement planning, while using term insurance to bridge the years of highest responsibility.

Public schemes also shape how term insurance fits into the overall picture. DPS provides a starting layer of dependants’ protection at a modest level, while HPS focuses on protecting your HDB home. These are important supports but they do not usually cover all your needs. DPS, for example, has a capped payout that may not be enough once you are supporting a spouse, children, and aging parents. HPS pays off the remaining mortgage for your HDB flat but it does not address everyday living costs, childcare, education, or medical bills beyond what is covered by other schemes. A private term policy can be layered on top of DPS and HPS, or used to cover private property loans, business obligations, or other financial commitments that would otherwise put your family under pressure.

Despite these advantages, one phrase still comes up often when people talk about term insurance. They say it feels like “wasted money” if no claim is ever made. With a whole life plan, there is at least a surrender value that can be cashed out or borrowed against in later years, and in some cases bonuses can be added over time. Term plans, in contrast, simply expire. This perception can be a strong psychological barrier. It is useful to reframe insurance in general. When you buy fire insurance for your flat, you do not view it as a loss if your home never catches fire. You view the premium as the price of peace of mind during the years when that risk exists. Term life insurance works in a similar way, except that the risk you are insuring against is the loss of your ability to provide financially for your loved ones. If you reach the end of a 20 or 30 year term without a claim, it usually means that you have had those decades to work, save, raise your children, and reduce your debts. By then, your original risk may have declined naturally. Your mortgage could be largely paid off, your children may be independent, and your retirement assets may be in place. At that point, it is logical that the need for that specific coverage fades.

For some people, keeping protection and savings in separate plans brings more transparency. You know exactly how much you are paying to transfer risk and exactly how much you are putting into investments or retirement accounts. This separation can make decision making clearer. You can adjust your term coverage when life circumstances change without disturbing your long term investment strategy, and vice versa.

There are several situations where the benefits of term life insurance tend to be especially strong. Young families with limited free cash but significant responsibilities often fit this profile. A couple in their early thirties who have just bought an HDB flat, are expecting a child, and are starting to support their parents have competing priorities. They need to build an emergency fund, contribute to CPF, think about education costs, and possibly help with healthcare expenses for older relatives. In such a scenario, allocating a relatively small monthly sum to a term policy that provides a large payout until age 60 or 65 can be one of the most efficient uses of their insurance budget.

Term insurance can also be important for those whose current coverage depends heavily on their employer. Many companies offer group life insurance as part of their benefits package, but that coverage is usually tied to the job. If you change employers, become self employed, or take a career break, you might lose that protection. A personal term policy that you own and control remains with you regardless of employment changes, preventing sudden gaps in protection.

Another group that may benefit from term life insurance includes individuals with private property loans, business partners, or personal guarantees on loans. In these cases, the consequences of an early death or severe disability extend beyond immediate family members. They might affect co owners, employees, or clients. Term insurance can be structured so that a lump sum is available to settle debts, prevent the forced sale of property, or allow a business to continue operating while successors adjust.

Evaluating whether term life insurance is useful for you starts with some basic but honest questions. Who depends on your income today, and who is likely to depend on it over the next decade or two. How large are your financial obligations in the form of mortgages, education plans, or other debts, and how long will they last. What resources already exist in the form of CPF balances, savings, investments, and current policies, including DPS, HPS, employer group cover, and any private plans you already hold. Once you compare the potential financial need against the resources in place, any shortfall becomes more visible. That gap is what term life insurance is usually best at filling.

Budget also plays a practical role. One advantage of term insurance is that it lets you start from a budget and work backward. You can decide how much you are comfortable spending each month, then choose a combination of sum assured and policy term that fits within that amount. The goal is not to buy the largest possible payout, but to reach a level of protection that would meaningfully cushion your household while still leaving room in your budget for savings, investments, and daily living.

Ultimately, term life insurance should be seen as one component in a broader plan rather than a stand alone solution. In Singapore, CPF provides a base layer of retirement and healthcare funding. Schemes like MediShield Life and Integrated Shield Plans address hospitalisation costs. DPS and HPS cover basic dependants’ and housing needs. Private insurance, including term plans, sits on top of this framework to personalise the level of protection to your family’s specific situation.

When you look at term life insurance from this angle, the lack of cash value stops being the central issue. The real questions become whether the policy gives your loved ones enough financial breathing room if something happens, whether it matches the period of your greatest responsibilities, and whether it does so at a cost that feels sustainable. For many Singaporean households, especially during the main working and child raising years, the answer is that term life insurance can provide real, practical benefits. It allows you to define what financial stability for your family should look like after a serious loss and to arrange, in advance, for a simple, transparent tool to secure that outcome.