Should I Surrender or Sell Your Endowment Plan? How does one come to the conclusion as to whether to sell it? - Seedly
 

Endowment Policies

Insurance

Asked by Anonymous

Asked on 25 Jun 2019

Should I Surrender or Sell Your Endowment Plan? How does one come to the conclusion as to whether to sell it?

My partner's mum bought her endowment policy since young and she has been paying $5,000 every year for it. How do we evaluate if she should surrender the policy or sell it using those online platforms? What should be the benchmark to know if she should sell it away or hold on to it?

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You mentioned the policy was bought when she was young. So it probably has been in force for some time.

Just some really simple considerations will be how many more years it has to go until maturity? Is 5k a year a concern now?

Supposedly you surrender now, how much can you get? Compared it to the money you have put in. As much as possible, if 5k is not a concern, you should keep the plan to maturity. Most endowment give decent returns similar to SSB.

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As a broker for pre-loved plans. I would normally tell people not to surrender unless they have a better plan (investing into 10% p.a, or requiring the cashflow etc etc).

You may relook into the riders that you are putting in (if there is any) and check the yield per year.

For individuals who have entrusted me, the following are some questions that I have consider to assist them to make an informed decision :-

1) What was your needs when you back then, that got you to commit to this policy? Does that need still exist? If yes, does surrendering the policy has an impact on that need?

2) Are you aware of all the options (Policy Loan, Reduced Paid Up, Reduction in Sum Assured, Premium holiday, Redating) that your policy may offer that might be better than surrendering?

3) Are you looking at returns only? Is there any particular reason why "Buyers Regret" sets in? Have you improve your knowledge and wanted to seek a 3rd party opinion instead? https://www.linkedin.com/in/ethan-loh-tat-tian-53071126/detail/recent-activity/posts/

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Eric Chia
Eric Chia, Senior Financial Consultant at Prudential
Level 4. Prodigy
Answered on 30 Jun 2019

Just a simple benchmark to use, does your partner’s mom do investments?

If she doesn’t, then keeping the endowment plan is better. Because endowment plans yield better returns than traditional bank savings account.

If she does investment, then are her investment returns higher than what the endowment plan offers? Also is there opportunity for her to invest the money immediately if the endowment plan is surrendered? Because surrendering the endowment prematurely incurs not just losses to the policy, but also investment returns may not certainly be better.

One thing I’m curious, are you absolutely sure that the plan your partner’s mom holding is an endowment plan? You mentioned she bought it when she was young and traditional Endowment plans don’t last more than 30 years. If the plan is an annuity or a whole life plan, the factors and benchmark to consider will be different.

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You'll need to calculate the existing bonuses already paid, because those are now guaranteed as well as future growth every time you pay a premium. Policies after 20 years or so, usually earn 6-8% everytime you pay a premium. Most of the time unless you desperately need the money, it'll be better to keep an old endowment policy.

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