In previous articles, we have shared the potential returns of our single premium Endowment Policies on our platform. This makes it easy for our clients to understand what the policyholder will receive by the end of the term.
In this article, we will highlight two of our new recurring premium Endowment Policies on our platform. We will also explain in further details on what are – Projected Investment Returns, Capital Guaranteed and Participating Funds.
Understanding The Terms Of Your Endowment Policy
Projected Investment Returns
Many people often don’t take the time to understand the illustration but it is key in understanding what contract you will be signing with your adviser.
The benefit illustration as seen here shows the details of the returns of your policy:
Credits: Straits Times
The Life Insurance Association has instructed that all insurers in Singapore include the same benefit illustration. It includes a maximum of 4.75% rate of return and a minimum of 3.25% rate of return.
The association has deemed this range of returns to be an achievable investment return. However, the maximum and minimum do not indicate the range of returns the client will receive by the policy term as it is only an estimate.
In the sample situation seen above, the capital guaranteed is less than the premiums paid. This is important to note for non-capital guaranteed policies. When purchasing the policy the client takes on the risk of not being able to receive their full premiums back after the policy term.
Capital Guaranteed Plans
The NTUC Income RevoEase and Aviva MySavingsPlan, both offer Endowment Plans with 100% capital guaranteed. That means that if you have paid a total premium amount of $200,000, the absolute worst-case scenario would be to receive $200,000 by the end of the policy term.
Capital Guaranteed Plans are very safe. This is because regardless of how well the fund performs the insurer is obligated to return your premium amount in full. This makes these funds a great asset for your portfolio as it reduces the overall risk you undertake.
Endowment plans are either participating or non-participating. A participating plan is a plan that has your money invested in a fund managed by the company. These funds invest in stocks, bonds and a variety of assets to help boost returns on your Endowment Plan.
The guaranteed benefits are paid out annually. These benefits take the form of bonuses and gains of the underlying fund. They are then added into the policy and form part of the guaranteed benefit. Due to this, participating plans generally have a non-guaranteed portion on their returns.
On the other hand, non-participating plans do not invest your money in any funds. To compensate, non-participating plans have a higher guaranteed return than that of a participating plan. However, since non-participating plans do not profit off participating funds, their returns are generally lower than that of a participating plan.
The funds that are managed by each insurer differs, as they are run by their own teams. Therefore, the result is that the effective yield after deducting the cost of managing the fund will always be different from insurer to insurer even if the benefit illustration provided is the same.
For the returns on single premium non-participating funds, it can range from 2.25% – 2.65% depending on the terms of each individual Endowment Plan. For participating funds, the investments range from 3.25% to 4.75%, as illustrated in the table above.
Our Capital Guaranteed Funds on our Platform
In the case of NTUC Income RevoEase and Aviva MySavingsPlan, they are both participating funds. Therefore, there is a higher potential for earning bonuses as compared to a non-participating fund.
The Aviva MySavingsPlan is a life insurance participating Endowment Plan that facilitates wealth accumulation. It allows you the flexibility of choosing a savings term that suits your needs. This plan provides you with stable savings returns and insurance coverage against death, accidental death and terminal illness.
The NTUC Income RevoEase has a regular premium Endowment Plan with a policy term that ranges between 10 – 25 years. You can choose from a payment term from 5, 10, or 15 years. This plan also provides protection against death, accidental death, total and permanent disability during the policy term.
If you have any questions or would like advice on an Endowment Plan that’s right for you, feel free to reach out to our friendly representatives at +65 3163 9184 or [email protected]
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