The recently-introduced compareFIRST platform, launched as a collaborative effort by the Consumers Association of Singapore (CASE), MAS, the Life Insurance Association, Singapore and MoneySENSE has broken new boundaries in the life insurance space with an online comparison portal that allows users to compare insurance policies from different insurers, and across different products.
Now, in case you don’t already know, we here at MoneySmart are rather big on comparing products before you make a purchase decision, but in an arena previously dominated by financial advisors and supported by plenty of strong marketing efforts, this is certainly one of the most crucial developments in the personal finance space.
There’s only one tiny problem, and that’s the reason for this article: unlike something like a credit card or personal loan, which is a relatively straightforward product, buying insurance, especially life insurance, is not the sort of thing you want to be doing completely uninformed.
If you’ve ever been in a situation where you’ve not understood a word your financial advisor is saying when they’re explaining different policy details to you (myself included), this online portal might also present yet another set of information that will take some time to digest and fully make sense of.
So for starters, we’re not here to tell you which insurer to go with (and if we did, we might be writing the rest of our blog posts behind bars), nor are we here to debate the merits of different policies (we kinda already did that here). We’re just here to break down what you need to know on the site before making a choice. Do note that at the moment, you still can’t buy anything from the site, and it’s purely informational, but it definitely helps if you are trying to do your homework before buying insurance.
Where Should You Start?
If you’re someone who has not thought about insurance coverage at all (tsk tsk), here’s a short introduction to what you should consider buying as a start, and a basic introduction to Term Insurance. For the purposes of comparison, we are going to use Term Insurance here as the foundation for our explanations because 1. It’s the most straightforward and 2. It provides you with the most coverage for the lowest amount of money that you’ll need to input.
When you first go to the Term Life section of the compareFIRST site, you’ll notice a choice in the wizard for DPI and non-DPI products so we will look at the two of them separately:
What on Earth is Direct Purchase Insurance (DPI)?
DPI, simply put, is a group of term and whole life insurance products with total and permanent disability (TPD) cover and optional critical illness (CI) riders that you can buy directly from life insurance companies, either via their customer service centres or websites (if possible).
The features of these products are largely standardized for simplicity’s sake, but another key distinction is that no commission is charged so you pay lower premiums than comparable life insurance products.
One of the other key differences that is important to note is that DPI products are capped at $400,000 per insurer per person insured. This maximum coverage number was based on a study conducted by the Life Insurance Association of Singapore (LIA) on the average coverage needed for the average Singaporean. We’ll go into some product differences between insurers later, but if you want a break down of what Term DPI and Whole Life DPI cover, you can reference the table MAS’s Moneysense website here.
Comparing DPI Products
As a simple scenario, we will take a 25 year-old male, who is a non-smoker and wants to get covered for $400,000 which covers death, total and permanent disability (TPD) and Critical Illness (CI) till the age of 65. Here’s a summary of the results:
|Insurance Provider||Annual Premium ($)|
|Zurich Life Singapore||1,186|
|Tokio Marine Life Insurance||1,225|
|HSBC Insurance Singapore||1,272|
Given the relative similarities between products, we’ll compare the 4 cheapest options:
You’ll notice that by and large, the features (those cute icons at the bottom and the coverage details) are similar. With AXA being the cheapest option available, there is still a difference of an additional 1 year of coverage due to differences in age definitions between insurer. It’s not a loophole, you just get one year additional coverage.
Term DPI is great for people who want to start out with some basic coverage, but there are certain aspects for comparison that become more apparent and important when you consider non-DPI Term Life Insurance.
Comparing Non-DPI (Full) Term Life Insurance
Using a similar scenario above, we will take a 25 year-old male non-smoker, who wants to be assured for $500,000 for 16-20 years. The coverage options here for full term life insurance are different from DPI due to some factors we will cover below. Sorting the results by the 4 cheapest options that cover TPD and CI, as well as maintain the amount of insurance coverage over time, here’s what we get:
Going back to the icons at the bottom, this is where product differentiation is more important to take note of. The 3 key factors that you should be looking out for are:
- Renewability (second from right, bottom row): This allows you to renew your policy at the expiry of the term, regardless of your medical condition, but of course at a different premium. This allows you to enjoy the same coverage should you still require it at the end of your policy term.
- Convertibility (bottom right): This allows you to convert your term plan to a permanent coverage plan. This feature gives you the option to convert to a whole life plan later on in life, when you are more at risk of health conditions, and this is regardless of existing conditions. This is great for people who don’t currently have a lot of money to spend on whole life plans at the current moment.
- Indexation: This option is something included in the policy details that protect your coverage from getting affected by inflation. Your current coverage might not be worth the same amount due to inflation further down the road, and this feature helps to protect against that.
While it’s certainly important to buy insurance to make sure you are covered financially and not purely for investment, it’s also equally important to make sure that you are getting the most value for your money when choosing which policy to buy.
The funny thing about Singaporeans is that when it comes to buying insurance, the “kiasu” side tends to kick in and we’ve spoken to many people who are overspending on their insurance premiums simply because they aren’t sure of what they’re covered for, and thus associate a higher premium cost with better coverage.
As you can see from the compareFIRST results, most expensive doesn’t equal to being the best. Stay informed on what you need to look out for in different insurance policies by following MoneySmart on Facebook as we further break down the tricky world of insurance.
You might be wondering where a financial advisor comes into all of this, and if you are looking for something a bit more comprehensive, it might still be prudent to speak to one further down the road. But for many Singaporeans who don’t even have basic coverage, this is certainly a great place to start first.
And as you can see, you don’t have to spend an inordinate amount of money to get sufficiently protected at a basic level. What is important is making sure you get the most value for money out of the policy you’re getting, and that is where understanding the various options for the term life policies is exceptionally important.
What are your thoughts on the new compareFIRST platform? Will this make it easier for you to buy basic insurance? Share your thoughts with us here!