Endowment Policies - Seedly

Endowment Policies

A savings plan with a payout over a period of years

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Insurance

Endowment Policies

Having run investment, insurance and healthcare businesses, your finding is no surprise. Let's start with a brief breakdown and basic principles to help you understand. First, my opinion is that many people are sold insurance which they don't fully understand. Try asking someone to repeat the features and benefits of an insurance product they bought. Chances are that even a CEO level person is clueless and embarrassed. This has to do with the sales methods and the way insurance has been marketed. It has improved a lot over the years and there are many well-meaning salespeople, but there is an arguable mismatch between the sales and buy side of the insurance market in terms of sophistication, motivation and needs. Second, most sales-driven insurance methods end up selling you the highest premium product. Due to the inevitable mismatch between the sales and buy sides of the situation, the buyer is often less motivated to know the exact details, often ending up with the proposition as "what is your budget?" and the sales side tries to cobble a product that sucks up what you say you can afford. This is an unfortunate reality. Third, insurance is mostly a bundled product comprising an actuarial component - let's call it "A", and a savings component - let's call it "B". A is constrained by actuarial calculations and is rather fixed. B can be as high as possible to suit your budget. There is a tendency to sell a higher premium insurance product because the commission is percentage-based. So the only way to motivate sales is to structure a bundled A+B product - which means there tend to be sales of what we call - whole life or endowment insurance products - which contain a lot of B. Fourth, when the insurance company gets your B, it adds up all the Bs from all insured members and pools it into an insurance fund. But the way the insurance fund is invested is constrained by the actuarial considerations and regulatory requirements - which tend to limit the ways your B is invested. Mostly, into long term bonds. Hence, the returns are constrained because the risks must be set relatively low. Fifth, you will note that you may likely have been sold an insurance product which contains a high proportion of B which is then managed in a pool which has no regard for you as a person. For example, if you are 20 years old and the others in the pool are of different ages (and risk profiles), your B together with all their Bs are managed according to the insurance company’s profile – not yours. There is no personalization. Lastly, the above explains why your returns are low – without going into greater details. I would add that in the case of “non-participating” policies, the insurance company merely gives you the returns indicated in the insurance benefit illustrations and can keep the extra returns it earns – if at all. Not bad for the insurance company. In response to the market, insurance companies offered to share these potential returns through commonly called “participating policies” where you not only get the illustrated returns in the benefits documents, you also get to share in the gains made by the insurance company through bonus declarations. I hope these basic points give you a better understanding, though there are more details. What I would do is to clearly define my protection needs. Then consider buying term insurance which purely A component which will be cheaper than a bundled A+B product. Use your resulting premium savings (by avoiding the bundled A+B product) and invest that sum regularly. Today, using digital life insurance platforms and Robo-investments, you can construct your own A + B product without the bundled constraints and high commission expenses. Bear in mind, insurance commissions for bundled A+B products can be as much as over 100% of your annual premium! Seek advice from a financial adviser and make sure it is not an insurance sales push. All the best!

Endowment Policies

Family

Savings

Do bear in mind that if you commit to a short term endowment plan, you absolutely cannot surrender it until the the policy matures, or you will lose money. 3 or 5 years, while not extremely long, is still a period whether you will have no access to this money, and hence you need to consider if you will have enough emergency funds to meet your needs during this period. I'd personally opt for the 3 year one to give myself more flexibility, unless I absolutely can live with not having access to the money for 5 years.

Endowment Policies

Savings

You're young and can take a lot more risk with your investments. An endowment policy is a conservative portfolio that will give you about 2-3+% with flexibility of coupons during your savings period. But with your investment horizon, you could take the risk of a 100% globally diversified equity portfolio. You may want to introduce endowment plans in your 30s and 40s when you start introducing bonds and fixed income instruments to your portfolio.

Endowment Policies

Insurance

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.

Endowment Policies

Term Life Insurance

Insurance

AXA Term Protector is the only one. Here's proof. ! You can pay throughout or pay for 15 or 20 years.
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Insurance

Endowment Policies

For the returns risk, just remember the non-gauranteed portion have a small risk of giving $0, and a slightly higher probability of giving less than stated, due to market (which is the same as any endowent plants). But since its a pre-loved plan, you can surrender anytime if the returns are not fantastic to you. For the legal risk, its stated in my article. https://www.linkedin.com/pulse/have-your-financial-advisor-shared-you-traded-life-ethan-loh-tat-tian/ For the risk of insurer belly up, it can't be easily found because you wouldn't know whether the person has reached the SDIC limit for his other policies. P.S: I am a self-employed broker so if you wish to, you may engage my service.

Endowment Policies

Insurance

Savings

Regular Shares Savings Plans (RSS)

Alan Kor
Alan Kor
Top Contributor

Top Contributor (Jan)

Level 5. Genius
Answered on 04 Jun 2019
1) do u like locking up your money for a period of time? 2) is the guaranteed returns satisfactory to you?

Insurance

Whole Life Insurance

Endowment Policies

Term Life Insurance

Brandan Chen
Brandan Chen, Financial Planner at Manulife Singapore

()

Level 5. Genius
Answered on 08 May 2019
I am an Advisor with Manulife, but due to MAS regulations, we arent allowed to provide any recommendations online without having a full understanding of your profile. However, I can break down the basics for you via this comment. Firstly, we should first understand how much coverage we require for both Early CI and Late CI. Typically, we would suggest a coverage of about 5x of your annual income for coverage. For Early stage, typically about 1 - 2 x of your annual income. Secondly, what are the options available. There are typicall 3 options for you to take up. Whole Life Plan with ECI & CI rider, Term Plan with CI Rider, Multi-claim CI plans which is a term plan that only covers CI but allows for one to claim multiple times. Thirdly, What is your overall budget? My suggestion is that you should NOT spend more than 10% of your income on all your insurance including your health insurance and Personal accident insurance if any. Things to look out for: 1) No of conditions that are covered. For Manulife, we cover a total of 106 conditions, which is one of the more comprehensive CI plans in the market 2) Fine print on the definition of the conditions 3) For Multi-Claim CI, it would be good to take a look at the structure from the various insurers. Some insurers provide 0 waiting period for their ECI claims but do not allow you to claim from the same category of CI again, whereas some may have a waiting period of 1 year for multiple claims but yet do not restrict you in the category of CIs. In conclusion for Critical Illness plans, you may either get a combination of Whole Life and Term, or a Multi-claim CI plan depending on your budget and preference! As for endowment policies, there are typically 2 types, those with flexibility and those without. More often than not, the endowment plans with flexibility tend to generate lower returns as compared to those without flexibility. More importantly, before deciding on an endowment plan, do understand your current risk profile and your savings/investment objective. There are plenty of options for you to grow your money. You should definitely speak to a financial advisor to find out more! Lastly, feel free to connect with me via my email at [email protected] if you would like to have a further (non-obligatory) discussion on your personal financial planning.

Endowment Policies

Investments

Savings

I feel that endowment plans are for people who have problems keeping up with regular savings The returns and time frame is too long and I feel that it would be better to put the money else where Since you have signed up for one it might be wise to stick with it. Cancelling half way will mean a great lost in capital

Insurance

Endowment Policies

Savings

I have done comparison before. Effectively locking the liquidity for 20-25 years, and getting 2.43% of growth seems very inefficient to me. Why not consider putting into your CPF SA for 4% returns to hit FRS, (since if you are about 25 years old, by 55 you can get your excess amount on top of FRS, out), tax relief of up to $7,000 for cash topup, or even topup your medisave to BHS (which also has tax relief)? If you require the money to be in cold, hard cash, you may even consider some universal life like Save3 TIQ which has a 6 years lock in period, at 3% interest, and can look for better deals after that? I would expect interest rate for banks to increase anyway for such a long time. For even for citibank maxi-gain account (which you may require $75,0000) but earns 70% of Sibor + 1.2%. Do review why you want to save so long, and earn a paltry interest in this case... (even DBS multiplier seems to have 2.2% which is so much flexible than the savings plan imho).
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