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Old 30-10-2015, 05:35 PM   #1
bibu00
Master Member
 
Join Date: Apr 2010
Posts: 4,273
Things you should read before buying an endowment plan

1. What are endowment plans?
(From wiki)

An endowment policy is a life insurance contract designed to pay a lump sum after a specific term (on its 'maturity') or on death. Typical maturities are ten, fifteen or twenty years up to a certain age limit. Some policies also pay out in the case of critical illness.

Here's a guide to endowments by moneysense.gov.sg.

https://www.google.com.sg/url?sa=t&s...WByIotvfYoXGvg

2. Case study of an endowment plan.
I have this pruflexicash policy that i bought from prudential. Below screenshot is my benefit illustration. My premium paying is $396/month



Your eyes arent tricking you, the sum assured is way less than premium paid.

There is a chance that at surrender, I will only get back 55k for my 71k premium paid. And that Is a HUGE Risk to bear.

According to the benefit illustration, the value $88136, the maturity surrender value, is of a "projected 5.25% investment return". However, according to the POSB savings calculator, it is only a approx 2.8% interest rate.





Premiums go into a fund and the fund is invested by the company. If the fund performs at 5.25% over the course of your plan, you can expect to receive the values as per the projection, which in your case seems to be 2.8%.


As answered by a prudential agent, 5.25% is what the fund is projected to perform
The customer will only get approx 2.8% returns per annual.

This means "Hey, my money is invested in a fund thats generating 5.25% returns! But im only getting back approx 2.8%. BOOOOOO"

Bear in mind that 5.25% is the upper range of the projection chart. If it does not perform at this rate, i believe the 2.8% returns will scale down too.

So where does the rest of the money go?

Commission, marketing expenses, cost of insurance, people to maintain and service your policy, fund managers, maintaining the guaranteed amounts in your policy and the profits of the company among other things.
So the answer to my question is that i am paying $18,000 (approx), which is 26% of the premium paid at maturity, for the above stated purposes.

This policy covers me for ONLY 40-70k scaling according to the year premium paid.

So congratulations all pruflexicash/endownment policy holders, whatever your argument are, you cant deny the fact that 20%(in most case, more) of your premium paid goes to the company's new BMW 7 series owner.

Noticed an advertisement in the newspaper regarding NTUC policies returning a 5++% yield for their recently maturing policies.

Would like to kindly remind all MM/SSI readers to refer to my OP post and not be mis-led by the the advert. 5++% is what your fund perform, which is great, your money is working hard, insurers is doing a "decent" job picking fund that yields a stable market return for the customers.

BUT, your yield at the end of the policy is going to be WAY WAY WORST than whatever your fund is performing. This 5++% yield from your fund needs to be used for
3. Videos gallery. These will definitely change your financial life!



This is a super good video, google's discussion with 2 great sage of investing. Who they are, i will leave it to you to google their profile.


4. More good resources on endowment policies.
http://dollarsandsense.sg/understand...-in-singapore/
http://www.bigfatpurse.com/2014/06/t...dowment-plans/
http://www.bigfatpurse.com/2013/02/i...ndowment-plan/
http://www.straitstimes.com/forum/le...regular-review
http://tankinlian.blogspot.sg/2012/1...nt-policy.html
http://blog.moneysmart.sg/insurance/ever-wondered-how-insurance-agents-in-singapore-make-money-from-your-policies/

This link has a huge list of reader submitted matured endowment for analysis purpose.
http://investmentmoats.com/budgeting...-to-5-returns/

Last edited by bibu00; 12-07-2016 at 06:15 AM..
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