resale endowment

[nahbehism]

hi.. anyone bought resale endowment before?

it seems like a good deal as the previous owner has help pay off most of the comm.. any advice or concern?

 

[SpinFire]

Just calculate the returns that you'll get and judge for yourself lor...

Can provide any examples?

 

[wahkao3]

value it like a bond

what is the price that you are paying?
what is the coupon payment you receiving?
what is the coupon schedule?
when does the endowment mature?
what is the risk of default on the endowment?

 

[icicic]

hi.. anyone bought resale endowment before?

it seems like a good deal as the previous owner has help pay off most of the comm.. any advice or concern?

Now u have an incentive That someone dies...

 

[Keverus]

value it like a bond

what is the price that you are paying?
what is the coupon payment you receiving?
what is the coupon schedule?
when does the endowment mature?
what is the risk of default on the endowment?

not all endowments have cashbacks....

 

[Keverus]

Now u have an incentive That someone dies...

 

[nahbehism]

I m really noob at this resale endowment..

so u mean that the coverage will not be me.. but the original owner?

 

[icicic]

I m really noob at this resale endowment..

so u mean that the coverage will not be me.. but the original owner?

Bingo. So a bit morbid in nature la. No way the insurance companies will cover you without doing some underwriting fact finding.

Any bros got experience in this? I vaguely recall some concept of requiring an insurable interest for it to be valid.

To give an example, if i buy insurance on your house then you better hope i don't go shopping for bbq materials

 

[tatose]

I m really noob at this resale endowment..

so u mean that the coverage will not be me.. but the original owner?

hmm, you are new to this.

wahkao3 mentioned: "value it like a bond" but this is much more complex than just a bond...

Traded Life Policies - MoneySENSE

Q3: What are the risks associated with investing in TLPs and TEPs?

Some of the risks associated with investing in TLPs and TEPs are:

Life Extension Risk: It is difficult to accurately predict life expectancies. An inherent risk particularly associated with investing in TLPs and TEPs is “life extension risk”. This is the risk of the insured person outliving the indicated life expectancy. When this happens, investors will have to pay the premiums for longer than expected to finance the policy. As a result, the returns to the investor are reduced or may even be negative.

Legal Risks: The TLP and TEP products that are currently distributed to local investors are generally policies acquired overseas. This makes it difficult for local investors to assess the quality of TLP and TEP products sold. Should any grievance or conflict arise, investors would need to enforce their contracts against life insurance companies located overseas and deal with the legal system of that overseas jurisdiction. Investors may therefore face significant difficulties enforcing their rights. This is because the legal system of the overseas jurisdiction may differ from that of Singapore’s.

Liquidity Risk: As life expectancies are difficult to predict, investors may need to commit their investment funds for considerable periods of time, in some cases, 10 years or more. Investors may find it difficult to re-sell the policies they have purchased.

Credit Risk: If the life insurance company becomes insolvent, investors are exposed to the credit risk of the life insurance company which issued the underlying life or endowment policy.

Foreign Exchange Risk: The benefits from the policy may be paid in a foreign currency. Investors may have to bear the exchange rate risks of converting these benefits into the local currency.

Other Risks: A higher incidence of fraud has been associated with the sale of TLPs and TEPs in countries where these products have been sold for some time. Investors risk losing their principal investment amount if life insurance companies deem a policy null or void due to fraud or other reasons. Social and ethical concerns have also been raised as the investment returns on such products are inversely linked to the life expectancies of the insured persons.

Conclusion

Transacting in TLPs and TEPs involves complex legal, confidentiality, disclosure and risk assessment issues. It is important that investors are well informed and fully understand the nature of the risks involved before entering into contracts involving these products. Here are a few things you should check before deciding to invest in a TLP or TEP.

Understand how these products work. Assess whether such products suit your risk appetite and investment time horizon.

Ask for written materials on the product and read the documents and fine print carefully.

Assess how investing in the TLP or TEP you are considering compares with other investment options.

Last but not least, if you find that you do not understand the TLP or TEP or are not comfortable with its risks, do not invest in it.


My take: If you are trained in Actuarial Mathematics and got yourself a chart of Mortality and Morbidity rates, you can probably invest in related product with confidence. MAS do not have a clear guideline on how to regulate and express the risks of this product in a clear and concise way that public can understand and assess easily.

 

[wahkao3]

so much risk laced with the endowment.
Honestly i do not know much about endowments.

But I am very familiar with bonds
for me, I might as well get a straight tradable bond off SGX when rates go up.

Risk free on the 10 year is only 2.5%. I target 6%

 

[nahbehism]

thanks for the advice.. was wondering why theres such a good deal.. and became really cautious about it.. as we all know.. theres no free lunch in this world..

 

[tatose]

thanks for the advice.. was wondering why theres such a good deal.. and became really cautious about it.. as we all know.. theres no free lunch in this world..

It is a good deal, if you know what you are dealing with.

Only problem is that this product is not regulated by MAS, so you are not protected by OUR government.

So, to close the other gaps/reduce other risks:

1) You need to get the endorsement (of sorts) from the Insurer that you are NOT a moral hazard to the policy.

2) You must know how to assess the mortality and morbidity of the insured to gauge the profitability of the policy.

3) Get proper documentation before hand so that claims and frauds can be resolved and identified before the "activation" of the policy.

4) Get a consultant to work out the taxes and legal procedures involved. (this is the hardest).

5) Assess the risk of insurer not paying up (this is the easiest).


If you didn't know, banks do this "resale endowment" related stuff every day when they ask you to sign for insurance on top of mortgages. They wanted insurers to pay up in case you die before fulfilling the mortgage obligations.