What's the difference between endowment insurance plans and life/health standalone insurance plans? - Seedly
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Anonymous

Asked on 13 Feb 2020

What's the difference between endowment insurance plans and life/health standalone insurance plans?

Does the standalone policy provide more coverage/amount then endowment? What's the pros and cons of each type of policy?

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Hi anon,

Endowment insurance is basically intended for wealth accumulation. It is intended to mature at some stage in the policy, either at one go, or over a period of time. Thus, the intention is to grow your wealth in a safe manner, since there are guarantees to it, as well as non-guaranteed components. Non guaranteed components, when declared and added to the policy, become guaranteed. They are not meant for protection, thus any protection afforded by them is minimal.

Health insurance basically covers your hospital bills and associated costs of treatment. Without it, you are at risk of financial ruin from a large and unexpected hospital bill. The bills are covered by the insurer, restoring you to a neutral position.

Life insurance covers events, such as death, or TPD, or Critical illness. In this case, they are meant to pay you a sum of money, but only when the covered event occurs. If the event does not occur, and the policy expires, then nothing is paid. However, if it is a whole of life policy, then if the covered event occurs at some point in your life, you will get a payout.

Standalone life/health plans are meant for protection. Thus, their coverage is far higher than endowment. You will need to understand your coverage needs, how long you need to be covered for, and then you can decide which type of plan may suit you (there are many permutations, e.g. Whole Life CI, term CI, Multipay CI, etc)

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Question Poster

13 Feb 2020

Thank you! Your explanation has clarified my doubts

The objective of endowment plans is to "endow". It is to match a guaranteed amount for a guaranteed event that will happen in a life stage. They usually fall into two common scenarios:

  1. Retirement

  2. Children's University Education

Life Insurance policies are meant to protect income upon an insured event. These can be broadly classified into 3 main categories:

  1. Death

  2. Disability

  3. Critical Illness

Health Insurance Policies are meant to reimburse medical bills in an event of accident, illness or hospitalization. They insure against uncertainty in the cost of being treated in a medical facility.

There are no pros and cons with each type of insurance if you were to compare them side by side. Largely because all 3 serve very different purposes for very different problems.

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In general, healthcare insurance takes care of medical bills. In Singapore, the most basic healthcare insurance is MediShield Life. Here is some information about it: https://www.blog.pzl.sg/is-medishield-life-enough-in-singapore/

Correspondingly, many clients choose to enhance the coverage through a private integrated shield plan. Here is why: https://www.blog.pzl.sg/is-integrated-shield-plan-necessary-in-singapore/

Life insurance can be a term insurance policy, traditional whole life insurance policy, or an investment-linked policy. Its main purpose is to provide adequate insurance coverage against life's major events, e.g. death.

At the simplest level, we have the term insurance policy. Here is all the basic information that you need to know: https://www.blog.pzl.sg/what-is-a-term-insurance-policy/

In essence, whole life insurance is a combination of a term insurance with a participating fund. Here is some information about a participating whole life insurance: https://www.blog.pzl.sg/what-is-a-participating-whole-life-insurance-singapore/

And here is what a participating fund is all about: https://www.blog.pzl.sg/what-is-a-participating-fund-singapore/

For endowment policies, its focus is to accumulate cash value over its stipulated period. In most cases, this is done through a participating fund (information in the link above).

Besides, most endowment policies also provide some basic life insurance coverage while the policy is active.

In general, a life insurance policy will provide more coverage as that is its main purpose.

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Endowment Plans are for wealth accumulation. It's investing money in a conservative portfolio with an insurer and the insurer rewards you with bonuses every year until the policy matures or you surrender the policy.

A life policy is meant for protection. You'll have a death benefit or other benefits like a lumpum payout in the event of illness. For this you pay cost of insurance.

Health insurance plans cover inpatient or outpatient costs or medical reimbursements when visiting a hospital or a clinic.

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CH
CH
Level 6. Master
Answered on 13 Feb 2020

Think of endowments as savings for potentially higher interests than a normal savings account, but lower risk than a stock market. something like between a savings deposit and a bond. it has minimal life coverage, and usually not cover illness and accidents. At the end of the policy term, you get back capital and interests. if you choose to terminate before end of policy term, you will never get back the capital.

a standalone plan i guess you are referring to term plan, are what people will be familiar with as insurance. covers death, illness, hospitalisation etc. but there will be no cash value at the end of policy term.

yes, usually term plans covers more than endowments.

hope this helps.

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