Am I making a loss with AIA SmartRewards Saver (II)?

AIA SmartRewards Saver (II) is an endowment policy. Accordingly, your premium is invested in the insurance company's participating fund.

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What is a Participating Fund?

Accordingly, your returns will depend on the experience of the participating fund. Generally, this can be split into two parts, 1) Guaranteed Return; and 2) Non-Guaranteed Returns.

Bonuses

For the non-guaranteed portion, it is usually in the form of bonuses - reverisionary bonus, and terminal bonus.

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Reversionary Bonus and Terminal Bonus Singapore

Overall Returns

To determine the total returns over time, we will add the guaranteed returns to the non-guaranteed returns. For this purpose, you may wish to speak to a licensed agent from AIA Singapore to show you the policy illustration. Thereafter, we can evaluate and determine whether it makes sense for you.

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Hi anon,

This is a endowment plan with cashback features.

You can take a look at the policy schedule and you will see a "Sum Assured" or "Insured Amount". This is the amount on which the 120% is calculated, provided that you pay all premiums in full. How the cashback works is that from year 3, they will pay you 5% of the sum assured or the insured amount.

So as an example, (based on their pamphlet), a 25 year plan with a insured amount of $10000 costs $71.12/mth for 25 years. Starting from year 3, the plan will pay $500/yr (5% of $10000) till maturity, for a total of 23 payments of $500/yr or $11500. Then there is a final maturity amount of $500, and the non-guaranteed maturity amount pays out as well. Thus, the guaranteed amount is a total of $12000 or 120% of $10000.

I hope this clarifies. Look for your own sum assured figures if you have this plan and 120% of that, is the amount you are guaranteed.

As to whether you are making a loss (how do you want to define loss though?), if we use the example above, the total premiums paid are $21336 and the guaranteed amount paid out over the duration of the plan is $12000. Yes, there are non-guaranteed bonuses, as well as non-guaranteed interest by re-depositing the coupons, but they are just that: non-guaranteed. Your numbers my vary, but the idea of what is guaranteed and what is not does not change. You should be able to draw a conclusion from this.