Insurance in Singapore: Tax Savings & Wealth Building

At a Glance

Tax Benefits: Foreigners can claim tax relief of up to SGD 35,700 per year via SRS accounts.

Safety: SDIC protects up to SGD 500,000 in guaranteed surrender value per insurer.

Flexibility: Most Singaporean policies are globally portable and can be maintained even if you move back home.

When you first move to Singapore, one of the biggest dilemmas is what to do with your existing insurance from back home. Should you cancel it or get a new policy here? I remember spending many sleepless nights comparing Korean and Singaporean insurers when I first started my life here.

As a global financial hub, Singapore offers a wide range of insurance products, but the system differs significantly from many other countries. Without understanding the specific tax benefits or refund structures, it is easy to miss out on potential gains. Here is a guide to the essential life and endowment insurance information every Singapore resident should know.

Choosing the Right Life Insurance in Singapore

Life insurance in Singapore, designed to secure your family's future, generally falls into three categories. Your choice should depend on your specific situation and goals.

Term Life Insurance: This is a pure protection product that covers death or total permanent disability for a fixed period (e.g., until age 65 or for 20 years). It offers the lowest premiums, making it ideal for those who want high coverage at a minimal cost.

Whole Life Insurance: This provides lifelong coverage and builds 'Cash Value' over time. 'Multiplier' options are currently popular, allowing you to increase your coverage by 2 to 5 times until age 65 or 70 to ensure maximum protection during your peak earning years.

Investment-Linked Policies (ILP): A portion of your premium is invested in funds. While the surrender value varies based on market performance and offers high flexibility, you must consider the investment risks and management fees involved.

Endowment Plans: Building Wealth for the Future

In Singapore, many people use endowment plans as a stable alternative to bank deposits, as they often offer higher returns. These are particularly popular for building children's education funds or retirement nests.

Plan Type	Key Features	Expected Returns (p.a.)
Short-term Endowment	2–3 year maturity, fixed rates	2.5% ~ 3.5%
Long-term Endowment	Education/Retirement, bonuses	3.0% ~ 4.5% (incl. non-guaranteed)
SRS-Approved Plans	Can be purchased using SRS funds	Varies by product

Looking at the market trends for 2025 and 2026, limited-edition 2–3 year short-term plans from major insurers like Great Eastern or Singlife are highly sought after. They are considered stable because they offer higher interest than standard bank accounts while often guaranteeing the principal.

The Ultimate Tax Hack for Expats: Utilizing the SRS

If your annual salary in Singapore is SGD 100,000 or more, do not overlook the Supplementary Retirement Scheme (SRS). It is one of the most powerful tools for legal tax reduction.

Contribution Limit: Foreigners can contribute up to SGD 35,700 annually. This entire amount is deducted from your taxable income for that year.

Insurance Integration: Funds sitting idle in an SRS account earn only 0.05% interest. By using these funds to purchase SRS-approved endowment plans, you can save on taxes while generating additional returns.

Important Note: Foreigners must maintain the account for at least 10 years after the first contribution to avoid a 5% early withdrawal penalty. After 10 years, only 50% of the withdrawn amount is subject to tax, which is highly advantageous.

Essential Safety Nets to Check Before Signing

Singapore has strict regulations to protect policyholders. Always verify these two points before committing to a plan:

SDIC Protection Limits: Even if an insurer fails, the Singapore Deposit Insurance Corporation (SDIC) provides protection. Coverage includes up to SGD 100,000 for death benefits and up to SGD 500,000 for guaranteed surrender values per insurer.

Free-Look Period: If you change your mind, you can cancel the policy within 14 to 30 days of receiving the documents. You can get a full refund minus any administrative costs like medical check-ups, so take your time to read the policy carefully.

Expert Tips for Expats

Finally, here are some practical tips for those considering insurance in Singapore:

Confirm Global Portability: Most Singaporean policies can be maintained even if you return to your home country. However, keep in mind that payouts are usually in SGD, meaning you will carry some exchange rate risk.

Designate Beneficiaries: Ensure you designate your parents or family members back home as beneficiaries. Without a clear designation, claiming the payout could involve complex legal procedures under Singapore law later on.

Full Health Disclosure: Singaporean insurers are very strict about the duty of disclosure. With medical records becoming increasingly digital and interconnected, it is vital to disclose your full medical history to prevent any future claim denials.

Start your journey toward financial freedom in Singapore with a smart insurance strategy! If you have any questions, feel free to leave a comment.