facebookFor endowment plan - Is it more worth to pay $375/month for 10 premium years or $750/ month for 5 premium years then lock the money up for 30 years. Which money grow better in insurance endowment plan? - Seedly

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Anonymous

19 Sep 2020

Insurance

For endowment plan - Is it more worth to pay $375/month for 10 premium years or $750/ month for 5 premium years then lock the money up for 30 years. Which money grow better in insurance endowment plan?

Discussion (3)

What are your thoughts?

Elijah Lee

Elijah Lee

18 Sep 2020

Level 18·Independent Financial Advisor at Phillip Securities (Jurong East)

Hi anon,

Besides what Hariz has mentioned, you also need to look at your cash flow and overall financial situation.

If you have a free cash flow of $1000/mth, committing to $750/mth might turn out to be a stretch if you lose your job.

If you have a free cash flow of $2000/mth, then $750/mth will be something comfortable and the remaining $1250 can be set aside for other uses, or even saved, so that it may be used to cover for your premiums if you lose your job.

Hariz Arthur Maloy

Hariz Arthur Maloy

18 Sep 2020

Level 15·Independent Financial Advisor at Promiseland Independent

Hi Anon, in a nutshell, the policy paid quicker pays more due to compounding returns.

The long answer:

Participating policies like endowment plans pay out based on the Reversionary and Terminal bonuses as a % of the sum assured of the policy.

The exact same policy will pay the same Reversionary Bonus, but different terminal bonuses based on the premium payment or policy term. Also the policy with the higher sum assured will also earn higher bonuses.

So if both 5-pay and 10-pay gives the same sum assured, it is likely the 5-pay will pay a higher Terminal Bonus Range because you paid it in fewer years. If the 5-pay is a higher sum assured, then it automatically wins already.

Leong Kaiyan

Leong Kaiyan

18 Sep 2020

Level 4·Manager, Financial Services at Great Eastern Life

As mentioned by Hariz, a shorter term premium payment for the same total premium will definitely rea...

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