How does the insurance company get the return on the endowment plans to be steady and guaranteed? Is this like a bond?

Participating Policy

Generally, endowment savings plan are participating policies. As a result, your money is invested into the insurance company's participating fund. With this in mind, it will be good to understand on how a participating fund works.

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What is a Participating Fund

Smoothing of Bonuses

In order to give the same rate of returns to the policyholder, some of the insurance plans adopt the concept of smoothing of bonuses.

In essence, the insurance company will keep some of the profits made during the good years. This is opposed to giving out all as bonuses. During the poorer performing years, they will use the surplus to make up for the shortfall.

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Smoothing of Bonuses Singapore

For smoothing of bonuses to work, the insurance company's participating fund must have proper track records and returns over time. Otherwise, there is simply nothing much that the fund can give to its policyholder.

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