Your Questions Answered Here › Term Life Insurance for Mortgage Purpose
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Siew Yee asked 5 years ago

Hi we can use Term Life Insurance for mortgage purpose instead of getting MRTA or MLTA right?

May I know how’s the premium like for Term Life Insurance with sum insured of 1 million for 10 years term for a 40-year-old female?

I found that most Term Life Insurance that can be purchased online come with maximum coverage of 500k. Can I get Term Life Insurance of 500k from two different insurers for 900k mortgage?

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ERIKA Staff answered 5 years ago

Siew Yee, yes you're right.
It make sense to actually look at your current existing policies and explore increasing the life insurance sum assured to gauge how much extra it is going to cost.
Then compare it with whatever new policy (term or otherwise) you are thinking to get for the same sum insured.
Of course you can get 2x 500k policy from 2 different insurers, no issue but FYI, in most cases, that may cost more unnecessarily.
It's the analogy of going to KFC and it costs less to order a combo meal vs ordering the exact same items on the menu ala carte.

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ERIKA Staff answered 5 years ago

Siew Yee, actually while any ILP or traditional policy is designed to cover until age 100, there is zero obligation for you to pay until age 100. That is a common misconception most people have.

Once you don’t need the coverage anymore, you can just choose to stop paying. When you do that, the policy coverage does not immediately stop because it will auto deplete your accumulated cash value.

When the cash value is depleted, then only coverage stops (aka policy lapse). And this could happen say, 1-2 years after you stop paying provided cash value is not too low by the time you stop paying.

So really, what you want to compare is:

A ) 1 mil new, Term life policy 15 years: Annual premium x 15

vs

B )Add 1 mil life to existing policy: Additional annual premium cost x 15

In B, after 15th year or whenever you want to stop, just request the policy change to reduce coverage from 1 mil to the minimum and also premium reduction at the same time.

Option B provides flexibility if, for some reasons, you need to extend the coverage from 15 to 25 years due to unforeseen circumstances.

For term policy, it just means at 16th to 25th year, you’ll rebuy the needed coverage when you’re older if that’s still important for you to cover.

Does this make sense?

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ERIKA Staff answered 5 years ago

Siew Yee, our estimation is about additional 120/month to add 500k Life, on top of what's currently inside the policy you mentioned.
The estimation is not final because insurer will revert with the actual offer letter after you submit application to increase the Life portion.Â