Endowment policy
Also commonly known as savings plan. There are 101 types of endowment plans out there. But what should you be focusing on?
An endowment policy in essence is to give you good returns, flexibility (if you require) and to give you back all the money at the age you need it most. This can be the age you need to purchase your house, or when you have your first child, or when your child goes to university or when your parents retire, or when you retire or at any point in your life a lump sum of savings will come in handy.
Once you have a relatively good idea of when you need the money, you should look for a plan that stretches the same number of years to your specific goal.
Next you need to find a plan which gives you good returns and this will be shown in a document knwon as the Benefit Illustration. This is readily available upon request from any insurance company. In the Benefit Illustration you will see the Surrender and Maturity Values table. It will show you the Guaranteed returns and Non-guaranteed returns. The guaranteed returns show you how much of your principal is protected under the liability of the insurance company should it face some financial difficulties.
The Non-guaranteed bonuses are usually shown in 2 scenarios/projections of what an insurance company might be able to give you. That means a Benefit Illustration can show you a 3% or 5% return, but in reality the insurance company can give you a 6% return, a 1% return, a 0% return or whatever they want to give to you. I will go into details later on how to tackle this problem.
First let's talk about the guaranteed returns. Is your principal adequately protected? Try to compare around for one that gives you a comfortable amount of guaranteed returns.
But please be mindful that I'm not asking you to go with the policy that has the highest guaranteed return. It should be a high amount but it doesn't have to be the highest amount.
Guaranteed values provide some sense of security but they do not provide any substantial yields on top of your principal. Non-guaranteed values are what really makes you the money, but the problem is...how sure can I be that an insurance company will pay me a decent amount of non-guaranteed bonuses?
Well, honestly there is no way to be sure that an insurance company will pay you a decent amount of non-guaranteed bonuses in future. Since there
is no way to predict how much non-guaranteed bonuses an insurance company will pay in the future, your best bet is to do an assessment of
the financial stability of the insurance company. That is really all you can do. Sometimes endowment policies are really as good as the faith you have in the insurance company. You may also check out their historical returns for their endowment policies to see how well they have been "treating" their customers.
I cannot post all the insurance companies' historical returns here, but you can privately speak with me : thetruthaboutinsurance@hotmail.com
Next, you should be looking at Flexibility. If you are stretching the policy to retirement age, how sure can you be that you will not retire earlier than planned?
Some endowment policies will allow for a premature partial withdrawal of your principal and bonuses. Again, you need to look at the Benefit Illustration to see if this feature is available. If there is, it should clearly state that there are no charges for withdrawing except for the loss of future compounded interest or bonuses on the withdrawn amount.
There are some plans in the market which have the withdrawal feature, but I will not disclose here. You can privately message me at thetruthaboutinsurance@hotmail.com or do your own homework.
Traded or resale endowment policies
Traded
or resale endowment policies are also endowment policies but have been
given up by the previous owner. Something like buying a second-hand endowment policy. There are many reasons why the previous
owner gave up, probably because they cannot afford the premiums,
or urgently require liquid cash. If you want to take up such a policy, you will need
to pay an agreed sum to the previous owner, and both parties will
submit an assignment application form to transfer the ownership. You will then own all the rights to the policy
and continue paying the premiums to enjoy the final maturity bonuses.
Traded
or resale endowment policies are not as readily available in the market
compared to endowment policies which can be easily taken up at any
insurance company. If you would like to know where to get them, you may
email : thetruthaboutinsurance@hotmail.com
