Asked by Anonymous

Anyone of you here surrendered your ILP or endowment before?

What was the final straw? As I have 2 30 year plans (1 ILP, 1 endowment) for each at about $250 a month premium and after consideration I feel that one should be surrendered due to tight finances. However , after paying for 3 years there will be loss of about 5k or 10k for both plans if cancelled. So I'm considering to surrender 1 but a bit worried on the losses. Any advice?

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    • Luke Ho
      Luke Ho, Money Maverick at Money Maverick
      175 Answers, 293 Upvotes
      Answered on 15 Oct 2018

      Hi OP,

      I've had quite a bit of experience in this area, which I actually mentioned in my response to Budget Babe's open letter: I have helped clients surrender policies, outright recommended them as well as told them why they should hold onto it instead. You can take a brief look here.

      Focusing directly on advice: taking a loss isn't simple. No one online can justify why you should take the loss unless they can guide you through the process of making it back with facts and figures.

      Kenneth has already provided the best advice here, but I'd elaborate by saying see someone, ideally myself or another trusted FA, about the details regarding the options that Kenneth has provided. A FA would arguably have incentive to ask you surrender your policy and put it in a new plan: ask them to justify it. How will they recover the 10k you have lost? Why would they tell you to surrender it at a loss? Can they show you how your investments have performed so far, and why you should choose a specific action? Will the investment returns improve based on the diversification of funds chosen?

      Additionally, ask the FA to see if they can help you in the area of your tight finances. What was your situation prior that you felt the premiums was managable before, compared to now? Have you explored other options in cutting down costs, or unlocking assets? (e.g. Mortgage or lowered Mortgage interest, CPF, etc)

      I really do encourage you to please get a proper consultation on this. You can always reach me here:

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    • Kenneth Lou
      Kenneth Lou, Co-founder at Seedly
      347 Answers, 825 Upvotes
      Answered on 15 Oct 2018

      Hey there friend :) You are not alone. In fact you can consider this reading this:

      We understand the many negativity surrounding an ILP online. Like all of your other insurance policies and investment decisions, below are 5 questions to ask before coming to a conclusion.

      • What was your intention when getting the policy? Is the policy still on its way to helping you meet that objective?
      • Can you invest at a lower cost?
      • Are you able to invest on your own and fetch a higher return?
      • Are you well-covered or have plans to get insurance coverage after cancelling your ILP?
      • Does it make sense to carry on with the ILP in terms of cost and its functionality?

      ” In short, if you are disciplined and know enough to do better financially and in terms of coverage, go ahead and cancel that policy! If not, stick to it.”

      You have two options:

      1) Cancel cut loss and move on

      "Had a monthly ILP of $200 and the fund was invested in the SG equity market.The policy only gave her a 10% return over 10 years. This was despite the market doing well Straits Times Index (STI) being at a high in early 2017.Should I had terminated it during a market downturn, I might not have broken even. Should I decide to do my own investing I can probably get around 5% yield a year simply by investing in REITs."

      2) Make some changes to your existing ILP policy and carry on

      "I had an ILP for 8 years and the investment results have been negative returns. I would have surrendered it if not for the health insurance component. The decision is partly due to my age, and the premiums to get a brand new health insurance coverage becomes too high.To overcome this, I surrender 90% of the investment after 10 instalments and took the funds out for other uses. So in essence, I still got my insurance policy but paid a small penalty to withdraw the funds out."

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      • Question Poster
        Thanks for your response! I decided to cut the ILP and keep the endowment plan. And make some small investment using the sum returned.
        17 Oct 2018
      • Kenneth Lou
        @Question Poster. Awesome ok hopefully the community here helped!
        17 Oct 2018
    Rave Ong Ci De
    Rave Ong Ci De
    41 Answers, 107 Upvotes
    15 Oct 2018

    Based on what u have written, ie tight finances, it feels like u have either a) overcommitted, or b) overpaid to the policy. $500 per month is significant. To put this in context, I’ve seen some people recommend that u put 10% for insurance. This means that u r earning 5k take home pay. (Assuming u have no other insurance.)

    Also, 长痛不如短痛 (short pain better than long pain)

    For me, my last straw was when,

    1) ILP was losing money, and my individual stock portfolio is losing money, but individual lose lesser than ILP’s portfolio.

    2) my agent is only interested in getting me to stay on the plan, by saying that investing on my own is risky. Yes it is risky. But the results seems to show that I’m slightly better off investing on my own, rather than through an ILP.

    3) I cancelled the plan with a significant loss. I lost about $10-12k over the termination of ILPs. So yes, I felt pain too. However, it is better for me to redeploy the funds to my own investments and other insurance plans, e.g. Term plans, hospitalisation plan, etc.

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