Traditional, IUL, or Legacy Plans: Which Is Right For Your Legacy Goals?

When people think about life insurance, they often think about protection with a payout given to support their loved ones if something happens to them. However, life insurance can also play a role in legacy planning by helping individuals to preserve wealth, provide lifelong financial protection and pass assets on to future generations with the right approach dependent on your financial goals and needs.

In Singapore, insurance based legacy planning can be broadly approached in three ways:

1. Traditional whole life plans with multiplier

2. Indexed universal life plans (IULs)

3. Legacy-focused plans

An overview of the three categories:

	Traditional whole life plans with multiplier	Indexed universal life plans (IULs)	Legacy-focused plans
Primary objective	Offers certainty with lifelong protection and cash value.	For lifelong protection and the potential for greater policy value growth.	Capital preservation and wealth transfer for intergenerational wealth transfer.
Death benefit	Minimum guaranteed death benefit available. Illustrated death benefit may increase annually. Option for higher guaranteed death benefit in the earlier policy years with the addition of a multiplier benefit.	No guaranteed death benefit. Death benefit is illustrated based on maximum charges and lowest assumed interest rate. The policy may lapse if cash value is insufficient to cover policy charges.	Minimum death benefit is 101% of your total basic premiums paid. Illustrated death benefit increases annually and has the potential to grow.
Premium structure	Limited premium term, often over 10 to 25 years. Receive higher guaranteed death coverage with a lower premium amount.	Premium term usually ranges with both single premium and regular premium options available. A higher minimum premium is usually required.	Premium term ranges from 1 to 5 years. A higher minimum premium is usually required.
Asset allocation strategy	Generally conservative with a large proportion allocated to fixed income assets.	Choose between the Fixed Account or Index Account, with further options to select your preferred index allocation.	Investment strategy differs between plans but tend to allocate up to 75% into riskier assets.
For Legacy planning	The simplest solution, but are usually designed around one life assured and immediate family protection.	May include change of life assured option for intergenerational continuity.	Suitable for intergenerational continuity. Plans include change of life assured, secondary life assured, policy splitting and/or legacy distribution options

1.     Traditional Whole Life plans with multiplier

Traditional whole life insurance covers for death or terminal illness and provides lifelong protection with cash value accumulation. Optional riders such as critical illness coverage may also be added.

Many such plans also offer a multiplier to enhance death coverage by up to 5 times the base sum assured during selected years (usually up to age 70, 80, or 85) and provides higher protection when financial responsibilities are the greatest.

As with other life insurance applications, financial and medical underwriting may apply depending on factors such as age, health and coverage amount.

Why it matters for legacy planning

Traditional whole life insurance can support legacy planning by providing a lifelong death benefit, offering greater certainty than term insurance where coverage expires at a predetermined term.

However, as traditional whole life plans are primarily designed around protection and guaranteed death benefits, they may not be the most efficient structure for those whose primary objective is maximising and structuring wealth for intergenerational transfer. In such cases, dedicated legacy-focused solutions may be more suitable, offering additional features designed specifically for wealth preservation and succession planning.

What Traditional Whole Life plans can offer:

Traditional whole life may be suitable for:

Lifelong protection for death, terminal illness. A guaranteed death benefit payout with the option to boost coverage in the earlier policy years (e.g. up to age 85). This offers good protection leverage relative to outlay during working years. Add-on optional critical illness and other riders to enhance coverage. Plan comes with guaranteed surrender value and potential non-guaranteed participating bonuses. Limited pay premium option available - choose to pay for 10, 15, 20, or 25 years.

Parents who are looking to give their child the gift of insurability. Those seeking predictable lifelong protection with higher coverage during their working years. Those who want a straightforward way to leave a lump sum for loved ones.

Available Traditional Whole Life plans with multiplier on FSM Global:

• China Taiping i-Complete Care
• Etiqa Essential Lifetime Secure
• FWD Life Protection
• HSBC Life Treasure III
• Income Complete Life Secure
• Manulife LifeReady Plus II
• Singlife Whole Life Choice

Full list of products can be found here. Alternatively, head to FSM Global’s website and click “Insure” > “Insurance Products” > “Whole Life”.

2.     Indexed Universal Life (IUL)

An Indexed Universal Life (IUL) plan combines lifelong life insurance coverage with potential for policy value growth linked to the performance of a market index, such as the S&P 500 or Nasdaq-100. Funds may be allocated to index accounts and usually comes with a 0% floor on the interest-crediting rate. While premiums are not directly invested in the stock market, the insurer will credit your interest based on factors such as index performance, participation rate and cap rate.

However, note that while the floor rate protects your interest crediting during market downturns, the policy value can still decline due to insurance charges, fees, withdrawals, policy loans and other deductions. If the policy value becomes insufficient to cover these costs, additional premium funding may be required to keep the policy in force. Therefore, while the index-crediting mechanism provides some downside protection against negative index performance, an IUL should not be regarded as a risk-free investment or savings product.

Unlike participating life insurance policies, IULs also do not offer a guaranteed surrender or cash value. Therefore, there is no guarantee that the policy will accumulate a minimum cash value or that you will receive a specific amount at a particular age or upon the surrender of your policy.

IULs generally requires medical underwriting, with the extent dependent on factors such as age, coverage amount and medical history. These underwriting outcomes may affect the premiums, terms or availability of coverage.

What an IUL can offer:	IULs are suitable for those who…
Lifelong death and terminal-illness protection. Potential for policy value to grow when the selected index performs well. Downside protection against negative index returns through a floor rate. Often available in USD, which may be useful for those with overseas assets or family members.	Want to use insurance for legacy planning purposes and would like direct exposure to global markets. Have a higher risk appetite and are comfortable with returns that may vary over time. Hold USD assets or want part of their legacy planning in USD. Understand that the policy needs to be reviewed regularly to ensure it remains sustainable.

IULs are complex products and may be harder to understand as compared to a traditional whole life plan. Before purchasing an IUL, consider if you need certainty over future cash values, or if you would prefer a simple protection plan with fixed premiums and guaranteed cash values.

Protection-focused IULs available on FSM Global:

• AIA Platinum Indexed Legacy (III)
• China Taiping Infinite Indexed Legacy
• HSBC Life Diamond Prestige IUL III
• Singlife Legacy Indexed Universal Life

Unsure how an IUL works? Read our articles to learn more about IULs and how they work:

• A Beginner’s Guide to Indexed Universal Life (IULs)
• Read This Before You Buy an Indexed Universal Life (IUL)

3.     Legacy-focused plans

Unlike traditional whole life plans that focuses on lifelong protection, legacy-focused plans are designed for individuals who have sufficient protection and are looking to preserve, structure and transfer wealth across generations.

These plans are usually denominated in USD and typically offers single premium or 3-or 5-year premium terms options. Such plans also include features for intergenerational wealth transfer such as policy splitting, secondary insured features, and the option to change life insured multiple times throughout the policy term. Some may also allow death benefits to be paid in instalments for up to 10 years thus facilitating a more structured transfer of wealth.

These plans aim to preserve and grow wealth while providing a structured vehicle for passing it on to future generations. They typically offer simplified or non-medical underwriting, making the application process more straightforward and hassle-free.

What legacy-focused plans can offer:

Legacy-focused plans are suitable for:

A way to pass wealth to children, grandchildren, or future generations. Potentially higher cash value growth through participating bonuses. Greater flexibility for multi-generation planning. Staggered death benefit payable in instalments of up to 10 years. Option for a USD-denominate policy.

Affluent clients with surplus cash looking at alternative options to complement their will, investment and other estate planning arrangements Multigenerational planning: Parents or grandparents looking to pass wealth on to their children and grandchildren across multiple generations Individuals with multiple beneficiaries and want the flexibility in how wealth is distributed (option to split policies into new distinct policies)

Legacy-focused plans available on FSM Global:

• AIA Platinum Infinite Wealth II
• Manulife Signature Legacy Growth (USD)
• Manulife Signature Legacy Harvest
• Singlife Heritage Income

Full list of products can be found here. Alternatively, head to FSM Global’s website and click “Insure” > “Insurance Products” > “Whole Life” to view all policies.

So, which option should I choose?

While life insurance can support legacy planning in different ways, the different plan types will serve different purposes.

• Traditional whole life helps protect your family if something happens to you too early and may be the most relevant starting point for younger individuals.
• IULs aims to combine lifelong protection with potential market-linked growth over time and are suitable for those who have a longer horizon.
• Legacy-focused plans are designed for people who have already built substantial wealth and want to strategically transfer established wealth and create continuity across generations.

In Part 2 of our legacy planning series, we compare how these three types of plans stack up in terms of premiums and benefits. We also take a closer look at legacy-focused plans, the solutions available, and the profiles they may be most suitable for.

Ready to take the next step in your legacy planning?

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Available Products on FSM Insurance

Term Life, Whole Life, Critical Illness, Annuity, Health, Endowment, General Insurance (Personal and Commercial), Universal Life, Indexed Universal Life from AIA, AIG, Allianz, China Taiping, Cigna, Chubb, Etiqa Insurance, FWD Insurance, Great Eastern, HSBC Life, Henner, Income, Manulife, MSIG, Raffles Health Insurance, Singlife, Sompo, Tokio Marine, and QBE. *Please check with our team if the product you want is available on FSMOne Insurance

Disclaimer:

The views and opinions expressed herein do not reflect or represent the official views, positions, or policies of any insurer(s) and shall not be construed or relied upon as such.

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