Do take note of these commonly overlooked details when deciding which endowment plan to take up.
Endowment plans are typically known by the lay person as saving plans. The common reason why people take up an endowment plan typically is because they wish to save money. (sometimes for a specific purpose like children education, sometimes for no purpose beyond setting some money aside for potentially better returns than leaving it in a bank account). What a lot of clients commonly overlook is the guaranteed amount upon maturity and the yield.
Guaranteed Amount upon Maturity
Increasingly in today's context, more people are becoming aware that the maturity value of an endowment plan is projected (in other words, non guaranteed). While most people vaguely know that there is a guaranteed and non guaranteed portion in their endowment plans, most people overlook the need to check that the endowment plans they purchased minimally guarantees their capital at maturity.
If the intention is to save money, then more often than not most clients would expect to at least secure the initial amount they set aside. The common rational why plans with a lower guaranteed amount exists because of the added feature where clients can take out regular cashback before maturity. Having said that, doing so will affect the eventual return of the plan and many people who take up such plans may not even have the intention to activate this feature.
Yield
Very often many people purchase endowment plans based on the maturity value presented to them. In most cases, people get enticed by the dollar value that they see. However, it's also very common to overlook calculating the projected yield based on the duration of the plan. For example, if your plan is for 20 years, you need to calculate the projected annualised return to evaluate if the return of the plan justifies the opportunity cost of putting your money elsewhere like the Singapore Savings Bond or even a fixed deposit for the same duration.
Summary
Summing up this article, if your intention is to save money, then at the very least the money you put into the plan should be guaranteed (on paper) at maturity. The yearly return should also be doing better than if you were to put your money in an equivalent instrument of similar risk class.
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Disclaimer: The content created are based on my personal opinions and may not be representative to everyone or any organisation. If you have any doubts or queries pertaining to insurance or investment, please seek professional advice from a trusted adviser in an official setting. You may also reach out to me if you do not have a present adviser using the message box under 'Let's Talk'.
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