http://www.turtleinvestor.net/surrendering-my-aia-prime-life-policy/
Back in the days when my days were occupied by Sega video games, my parents bought an AIA Prime Life policy for me. Subsequently, I took over the payments of the policy once I’m capable of doing so.
Below is the projection of surrenders value provided by the agent. This is the original document which I’ve scanned. Marketed as a part-investments, part-protection policy to my parents, the most enticing part of the policy is that if we held it long enough, we would get back all our money, plus even more.
According to the latest annual participating fund update, it invests approximately –
72% in fixed income
20% in equities
3% in real estate
3% in other assets
2% in loans
aia-projection-1997
Notice that (from the 19-year to) the 20-year mark, there is a massive jump in the non-guaranteed portion Surrender Value (Total) from $9,855 to $21,385. Guess what? Twenty years (2017) is almost up.
Before we go further, let’s just say that the signs were already showing way before this. I don’t have the full set of documents but the trend is hard to miss.
At the halfway mark in 2008 when I started working, I began collecting these annual letters as much as I could, and I can see that the projected surrender value was revised downwards.
Year 1997 : $21,385
Year 2008 : $17,544
Year 2010 : $15,718
Year 2012 : $16,448
Year 2016 : $16,449
Post Sales Benefit Illustration
If you want the current Post Sales Benefit Illustration, you don’t have to go through the hassle of contacting your agent. Everything has already been digitized – simply log in with your account and the system can generated the latest set of figures for you on the fly. The below figures (Surrender Value : Total) were generated in June this year, which shows $16,449 and it confirms the amount stated in the letter I received.
aia-projection-2016
Thanks AIA, but it is about time to say goodbye. Shall take back control of my tiny pot of gold and put it to better use.
Oh yeah, I’ve been clearing a couple days of leave which gave me time to dig around the house. Plenty of paper unearthed which explains the inspiration to write about stuff like HDB and this
I got a feeling that there are a lot of people around my age stuck with policies like this.
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14 Comments
dj on August 12, 2016 at 5:24 pm
Have the AIA prime life plan as well (bought by parents) and also waiting for the 20 year mark to surrender! (Sometime late this year). Sadly my projected values are not as per the BI as there was some loan on it. But I guess there should still be a jump in year 20.
It feels like a very expensive term for the coverage, as its not limited pay whole life. Not sure if urs is the same as well?
Reply
Kevin L. on August 13, 2016 at 1:09 am
Hi DJ,
Ah, you’re another one of us! The same .. meaning? For AIA, I’m paying $73.17 monthly for $50k coverage with some riders on it. In comparison, my NTUC Income policy has $200k TPD/CI coverage at $68.90
Reply
Jasmin on August 12, 2016 at 8:08 pm
My husband has this policy bought from his buddy. He is still p-a-p
Reply
Kevin L. on August 13, 2016 at 1:03 am
Hi Jasmin,
P-A-P? Pay and Pay?
Reply
STE on August 12, 2016 at 8:29 pm
Yah ! for the past 20 teays,, you are just getting half of the return if you just invest in STI ETF ,, IRR just around 3.5 % ,,, with your own control ,, money shall double than that in enxt 20 years !!
Cheers .
Reply
Kevin L. on August 13, 2016 at 1:02 am
Hi STE,
Yeah, I know right? But then, I did enjoy 20 years of protection and luckily, I didn’t need to make a claim!
Reply
K on August 12, 2016 at 8:57 pm
Wah, I went through the long way of waiting for the mail. Certainly didn’t know about it being digitized. Thanks for the heads-up. You signed up for the AIA eCare?
Reply
Kevin L. on August 13, 2016 at 1:01 am
Hi K,
Yup, I did. Made things much easier when I wanna monitor the value of my policy.
Reply
B on August 13, 2016 at 7:40 am
Hi Kevin
I had to.read your posts twice to understand better
Pardon me for asking. Do you mean that the projected surrender value was revised downwards over time because of their lower returns over time? All along my understanding is that the guaranteed portion and surrender value will remain constant when we signed up from them the first time round. Only the non guaranteed portion will fluctuate. Is my understanding incorrect?
Reply
Kevin L. on August 13, 2016 at 10:25 am
Hi B,
Ah, mind wasn’t thinking too straight, slight amendments to make the post more accurate. From the documents, guaranteed portion went up, but non-guaranteed went down. They were perhaps being overly optimistic in the past when selling the policy.
Surrender Value (Guaranteed) went up from $7,800 to $9,883
Surrender Value (Non-Guaranteed) went down from $13,585 to $6,566.
Reply
Derek on August 13, 2016 at 8:27 am
Hi Kevin,
I have a similar policy as you. Mine is just called Prime Life and my parents bought it when I was 13. I have blogged about it here.
http://thefinance.sg/2016/03/30/how-did-my-whole-life-plan-fare-after-22-years/
We all know that the benefit illustration 20+yrs ago is flawed and XIRR based on my surrender value is about 2.6%. However, bearing in mind that I was 13 then and my parents are not financially savvy – they just hope to give me some form of savings when I grow up, I can live with it. If XIRR can increase to 3% when I reach the 30th policy year, coupled with the insurance coverage, – I will be contented.
Reply
Kevin L. on August 13, 2016 at 10:30 am
Hi Derek,
The plans look similar indeed! So you’re intending to keep holding?
Reply
Jared - SMOL on August 13, 2016 at 8:35 am
Kevin,
Welcome to the club!
$50K 20 years ago can buy HDB flat; now…
When I wrote my dumbest insurance piece, I ruffled some feathers who were in denial they were sold to…
Evidently, you can buy better coverage with lower premiums NOW compared to 20 years ago – so much for that snake oil spin better buy when young so can lock-in the lower premiums…
Reply
Kevin L. on August 13, 2016 at 10:34 am
Hi Jared,
Now, I’m of the opinion that we should keep concerns separate if we are capable of doing so.
Want protection? Buy coverage. Want to grow money? Invest.
Too difficult? Sticking to an all-in-one isn’t necessarily the worst decision. Certainly beats doing nothing at all.
Reply
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About Me
Hello there! I’m Kevin, otherwise known as the Turtle Investor. I’m a Singaporean in my early thirties, married to my lovely wife with no children at the moment. Welcome to my blog where I write about index investing as well as random stuff related to personal finance. Thanks for dropping by and hope you enjoy reading!
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Recent Posts
Surrendering My AIA Prime Life Policy August 12, 2016
First Pot Of Gold From HDB’s BTO August 10, 2016
My Favourite Comic Strip – Calvin & Hobbes July 28, 2016
Job Change : Well-Wishers & Nay-Sayers July 25, 2016
The Worst Thing That Can Happen July 14, 2016
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