Somehow, life insurance has taken on a reputation for not being affordable, even expensive.

If left unchallenged, this presumption quickly becomes problematic. Is it a fact that insurance, as a whole, is not affordable? Or is it merely an assumption that you have formed based on misunderstanding and some bad experiences of your friends or loved ones?

If we assume insurance is not affordable, we are more inclined to go without protection against the risks of life. Now, an inaccurate assumption becomes a dangerous conclusion.

Is insurance really expensive, or unaffordable, as they say? We say “no!” (and not just because we’re in the business!)

Here are two main reasons why life insurance is more affordable than you think.

Life Insurance is Priced According to Your Needs

Life insurance premiums can add up to a substantial amount, depending on what policies you actually buy. However, there are no hard and fast rules that say you have to buy Plans A, B and C, and add on Riders X, Y and Z.

Sure, life is unpredictable, and it can seem futile trying to cover all your bases – so to speak. But that’s not what insurance is for.

Insurance was created as an attempt to negate the unpredictability of life. It is a rational tool to cope with an irrational world. Therefore, insurance works best when we use it in a rational manner.

This means that you only need to get insurance that is sufficient for your needs. Remember, insurance is designed to help you and/or your loved ones continue to have a comparable lifestyle in the aftermath of a tragic incident. It is not intended to make anyone rich.

So how much is just right? A good rule of thumb is to aim for 10 times of your annual income.

If you’re a fresh grad just starting your career, earning about S$35,000 a year, then get life cover equivalent to S$350,000.

If you and your expectant spouse have a combined income of about S$70,000, then purchase a policy that would give you S$700,000 life cover. (It is also entirely ok to buy separate policies each.)

If you are a retiree, you only need to meet the costs of critical illnesses and final expenses. In short, there’s never a need to spend more on insurance than you need

So challenge the assumption that insurance is unaffordable. Find out exactly how much the coverage you need will cost. If you don’t feel ready to talk to a financial adviser or insurance agent, try our self-serve portal to get a hassle-free, no obligation quote in minutes. (We won’t even ask you for your email address.)

Life Insurance Remains Affordable as You Age

Hey, wait a minute! How can that be true? Don’t insurance premiums increase as you get older?

Yes, they indeed do. But don’t forget that your income also grows with age.

Of course we aren’t claiming that earning a higher salary automatically makes everything more affordable; that would be naive. So let’s illustrate the point with some real, solid figures.

For our example, let’s take a look at Joe, who is a male, non-smoker, seeking basic term cover of $400,000 sum insured. Here are the monthly premiums for Joe at ages 25, 35 and 45, respectively, derived from our easy-to-use, self-service portal.

Age Premium* Increase over last 10 years
25 $17.39
35 $21.08 $3.69
45 $39.82 $18.74

*Source: singlife.com / Information accurate as of 21 May 2018

Let’s fill in more details, to help flesh out our example. Joe is a university graduate with a starting monthly salary of S$3,300. He is an engineering graduate and pursues a career in civil engineering. According to SGCharts, the following salary trajectory should be expected.

Age Median Monthly Gross Salary (Civil Engineer)* Increase over last 10 years
25 $3,300
35 $4,050 $750
45 $5,000 $950

*Source: pay.sgcharts.com

Now, imagine both 25-year-old Joe and 35-year-old Joe are considering buying a laptop, priced at S$2,500. With a salary of $3,300 a month, 25-year-old Joe would likely find it quite hard to afford the purchase.

However, 35-year-old Joe – now earning S$4,050 a month – likely wouldn’t be as reserved about the same purchase. In fact, he probably wouldn’t think twice about spending more for a higher-end model.

You’ve probably encountered this scenario yourself – as you start earning more money, things become more affordable, even if you find yourself spending more. When you were just starting out in your career, spending $10 on lunch seemed like an unjustifiable indulgence. After a few promotions and pay raises, $10 seems to be the bare minimum for a decent meal.

It is the same with life insurance. Although your premium rises with age (because your risk also escalates), your income would have also increased. For the average person, this also means a rise in buying power, which allows you to absorb the costlier premiums.

However, unlike most other buying decisions (say buying a larger 40K TV, or eating at more expensive restaurants), spending more to maintain your protection is a decision that becomes increasingly more valuable.

So yes, insurance premiums rise with age. But so does your buying power. Higher premiums should never stop you from getting the protection you need. Or worse, cause you to give up your coverage as you get older – when you are more likely to need it!