As with many other NS men in Singapore, I have been enrolled into the generic MINDEF Group term life which was pitched to us as a fresh eyed 18 year old botak in an air conditioned auditorium in Tekong.

You can find out more details about the AVIVA group term life here.

Most often you would realise that this group policies are way lower in premiums than personal policies.

"What's the catch?"

Being curious, I went to find out more about the differences which I hope can aid you in making a decision as well.

TLDR: Here's Why I Switched To A Personal Policy

1. Premium is not fixed (level) and some changes may occur during contract renewal

2. You will not be able to nominate beneficiaries under a Group Term Life

3. Total Permanent Disability is not paid out in a lump sum above $200,000 (three equal annual instalments)

4. Terminal Illness is only for expected death within 12 months of diagnosis

5. Group risk where if there is a maximum liability if there is a sub-limit of 0.75% of aggregate sum insured per year

6. You cannot use your Group insurance as your home protection scheme

7. You can only cover up to 70 years old, whereas personal can go up to 85 years old

8. Differences between MINDEF Critical Illness and Personal Critical Illness definitions

Edit: For death benefit, AVIVA will pay the first $150K to the Proper Claimant according to Insurance Act Section 61. The balance payment will be released upon receipt of the Letter of Administration/ Grant of Probate and Administrator/ Executor's NRIC.

Further Reading: The 8 Reasons In Detail

I will bring you through the reasons in detail below to hopefully aid your understanding on the differences.

Reason 1: Premium not fixed and changes may occur during renewal

This is naturally the biggest reason which I decided that it would make sense in these strange times where insurer companies are changing hands quite rapidly.

My fear is that in the event of a financial crisis or other situations, there could be a possibility where the terms are changed and premium amounts are bumped up (which is not impossible if you read through the details) upon renewal.

Also if you refer to the Premium table above, you will find that beyond age 65, the premiums escalate in a massive way. Rates are quoted per month. Naturally because the chance of you passing away between 65 to 70 years old is way more than before that due to old age.

Under a personal term plan, your premiums are level and fixed, and the earlier you get them (currently I am 28 years old) it is locked in for life, which I felt makes more sense in my current financial situation now.

Reason 2: Cannot Nominate Beneficiary In The Event Of Death

In the event of death a beneficiary receives the payout from your insurance policy in the unfortunate event of your death.

MINDEF Group Term Life

• You are unable to nominate a beneficiary.

The Nomination of Beneficiaries framework is not applicable for group insurance scheme. The main policyholder, that is, MINDEF and MHA, had directed Aviva to pay according to the prevailing laws of Singapore.

That is to say, in the event of a Death Claim, the law provides for Aviva to pay to the immediate next-of-kin (NOK) or proper claimant up to S$150,000. The payout of the balance of the insurance compensation has to be decided by a Court.

If the deceased had written a Will before his/her death, the family has to engage a lawyer to apply to the Court for a Probate, which may take up to 6 months.

If the deceased did not have a Will before his/her death, he/she would be considered to have died intestate. In such an event the family also has to engage a lawyer to apply to the Court for a Letter of Administration, which may take up to 3 years to resolve.

Personal Term Life

• You can nominate a beneficiary to recieve the full payout

Reason 3: Total Permanent Disability Is Not Lump Sum

In the event of disability...

MINDEF Group Term Life

• 100% of Sum Assured payout, but not payout in lump sum

• Company will pay a lump sum of first $200,000

• Balance in three (3) equal annual instalments

Personal Term Life

• 100% of Sum Assured payout in lump sum

Reason 4: Terminal Illness is only for expected death within 12 months of diagnosis

Terminal Illness means the conclusive diagnosis of an illness that is expected to result in the death of the Life Assured from the date of diagnosis. The Terminal Illness must be diagnosed by a specialist and the diagnosis must be confirmed by the company's registered appointed medical practitioner.

It's definitely not cheap to fight cancer, here's how much it costs.

MINDEF Group Term Life

• 100% up to $400,000 for advance payment benefit

• However only with certainty that it will lead to death within the next 12 months

Personal Term Life

• 100% of Sum Assured payout in lump sum

Reason 5: Group Risk

MINDEF Group Term Life

• If there is a high claim rate and hit the cap of the claim, Aviva’s maximum liability is subject to the sublimit 0.75% of the Aggregate Sum Assured.

Personal Term Life

• There is no such risk

Reason 6: You cannot use your Group insurance as your home protection scheme

When you buy your HDB or private property, you will need to purchase a Home Protection Scheme, which insures your property in case of death. Where you can't pay the mortgage instalments, this will be in place to ensure that your property is safe.

MINDEF Group Term Life

• You cannot use this for your HPS

Personal Term Life

• Can use for own personal benefit. Eg, level term plan can be used to replace Home Protection Scheme

Reason 7: You can only cover up to 70 years old, whereas personal can go up to 85 years old

This is not a massive reason for me, as I got my personal term life till 70 years old (for now) as I believe at that age, my liabilities would be lower, and dependents already taken care of.

But to others who want a certainty and piece of mind, you can stretch all the way for that extra 15 years of certainty and locked in at an earlier premium rate.

MINDEF Group Term Life

• Covers up to 70 years old

Personal Term Life

• Covers up to 85 years old

Reason 8: Differences between Critical Illness definitions

MINDEF Group Term Life

• Less comprehensive for early and intermediate stage CI

• No special benefits

• Premiums can get adjusted as per company's policies

• Definitions will be changed accordingly to regulations

Personal Term Life

• More comprehensive for early and intermediate stage CI

• There are special benefits for other non-CI conditions (up to 10 others)

• Premiums cannot be adjusted based on age

• Definitions would be locked in at point of purchase (in the policy documents)

Conclusion: Review Your Policy Documents If You Want More Certainty

As seen from the above, there are defiitely differences between a Group Term and a Personal Term.

Personally for me, I am progressing to a next phase of life when I am planning for kids and a family, hence I feel more comfortable with certainty in my insurance policies in the event of Death, TPD or CI for my dependents.

Having enjoyed the group insurance term coverage since I was a 18 year old NS boy, I feel that it is a good time, around 10 years later to review this and get covered under my own name for all the above reasons.

However, if you still feel that you are unable to afford the premiums, which would be a factor of 3x to 4x more annually, then you should still stick to the Group Term life insurance and CI riders.

It's definitely better than no insurance :)