Endowment Plan is an insurance policy that provides more flexibility than a typical life insurance policy. It has a savings plan feature and gives policyholders the option of choosing the duration of the term. It is the ideal policy for people who want to save up for their child’s education or purchase a bigger house. Endowment plans are more beneficial than savings accounts because the policyholder can earn more with a high interest rate. A lump sum amount will be paid once the policy matures and often it is of higher value than the standard term insurance because of a combination of insurance and investment features. The premium charged will also be higher because of higher returns and the coverage includes death and disability of the policyholder.
Unlike other insurance products, endowment plans come with numerous guarantees. However, not all companies offer endowment plans that come with guarantees. Some attractive guarantees that people in Singapore should look for in an endowment plan include Guaranteed Yield, Guaranteed Capital and Guaranteed Acceptance. Such guarantees can give policyholders the assurance that they will get good value when the policy matures.
List of the best endowment plans in Singapore
FWD Insurance: One of the leading general insurance companies in Singapore, FWD Insurance has recently launched its endowment plan for Singapore citizens. This endowment plan provides high guaranteed returns for a three year plan in Singapore. One can get this policy with a minimum investment amount of just S$1,000. One unique aspect about this policy is that people can purchase it online without having to go through the hassle of talking to various intermediaries. Here are some of the key advantages of FWD’s Endowment Plan:
- This policy is open for all individuals between the ages of 18 and 70 years.
- Among the three year endowment plans in Singapore this policy offers the highest returns at 2.02% interest per year.
- Guaranteed capital when the policy matures.
- Easy entrance for investors who want to start with a small premium amount.
- Shortest commitment time of just three years.
LIC Invest Smart: Life Insurance Corporation (Singapore) Pte Ltd. offers a fixed term endowment plan that provides guaranteed returns and financial protection after death and permanent disability. Here are some of the key benefits of this policy:
- The policy has a first year accidental death benefit wherein the insured person’s dependants will get a lump sum equivalent to 20% of the yearly premium in addition to the death benefit.
- Policyholders can cancel the plan within 14 days of receiving all policy related documents in case they are not happy with the terms and conditions.
- After the plan matures the policyholder will be paid as per the yearly premium amount.
- Policyholders have a grace period of 30 days for payment of second premium amount from the date of first anniversary of the policy.
NTUC Capital Plus: NTUC Income is an insurance co-operative in Singapore that makes insurance is accessible to all Singapore citizens. Its endowment plan known as NTUC Capital Plus covers death and permanent disability. It has various policy terms ranging from 10 years to 30 years. Some of the features of the plan include:
- Exclusive luxuries for policyholders who have an income.
- Policyholders get the flexibility to choose when their policy matures and how frequently they make their payments.
- This policy also has a surrender value after the policyholder pays two years premium.
China Life SaveReward 101Series II Endowment Plan: This is one of the most popular 5-year endowment plans available in Singapore. Buyers can either choose Renminbi (RMB) or Singapore Dollars (SGD) for receiving benefits. Here are some of the key features of this policy:
- Guaranteed maturity yield at 2.25% per year: The policyholder’s savings will grow in addition to the entire capital that the policyholder will receive once the plan matures.
- Affordable annual premium: The policyholder will only have to pay S$3,000 each year as premium.
- Three Years Premium Payment: Policyholders need to pay the premium only for three years for this 5-year endowment plan.
- No medical underwriting: Policyholders neither have to fill lengthy medical questionnaires or get a medical check-up to enjoy the benefits of this policy.
The above list of endowment plans is not exhaustive, but are the most popular among people in Singapore.
How does it work?
Let’s understand the endowment insurance policy a little better with an example.
Say you are 50 years old when you buy an endowment insurance policy with an initial investment of S$100,000 for 20 years. Then, the annual premium that you need to pay is S$5,000 and every year you will receive a standard bonus of 4% or S$4,000.
After 20 years, your bonus will stand at S$80,000 (S$4,000 x 20). At the time of maturity, you will receive a lump sum amount consisting of your initial investment of S$100,000 as well as the bonus of S$80,000, making it a total of S$180,000. In this case, the rate of return is 6%, which is higher than an average savings account return rate.
An endowment insurance plan provides cash values or bonuses every year, based on the rate of return from your with-profits funds. The accrued bonus is high enough to cover your life insurance policy premiums, making it a self-sustaining plan. If you pay your monthly premiums on time, then you will get a guaranteed return upon maturity. In the event of your death, the death benefit will be given to your child.
Unit-linked endowment insurance policy:
Unit-linked endowment policy is an investment where the premiums are used to buy units of a unit-linked insurance fund. The price of these units is set on the basis of performance of the investments in the fund. You can choose a growth fund or a value fund and the proportion of the premium invested in the fund.
What to look for while buying an endowment plan in Singapore?
Since an endowment plan offers both protection and investment at low risk, you can earn annual bonuses only if the investments perform well. These bonuses help safeguard your fund returns from market instability. However, if the returns are low then the bonuses will not be high to offset your premiums. In that case, you will have to pay the premium.
If the rate of return from the endowment insurance plan is lower than the final benefit value, then you can opt to trade the endowment plan. The buyer willing to purchase the endowment plan from you will pay more than the insurance company’s surrender value. After handing over the policy to the buyer, you are no longer liable to maintain the policy.
China Life Insurance:
China Life Insurance policy is a 5-year plan, offering one of the best endowment insurance policies. This plan can be substituted with any fixed deposit or Singapore Savings Bonds as it provides a high return with three types of guarantees – Guaranteed capital, guaranteed yield, and guaranteed acceptance.