Menu Content/Inhalt
Poor value of endowment PDF Print E-mail
Written by Wilfred Ling   
Tuesday, 31 August 2010

I saw an endowment policy that was bought in 1989. It supposed to mature on 2043. The original illustration shows that estimated maturity value is $169,757. The premium is $509.60 per year. Based on these figures, the IRR is 5.56%.

However, in the latest statement the projected maturity is $83,131. The revised IRR is 3.56%. By reducing the return by two percentage points, the maturity value drop by half! After taking into account of inflation, this is a disaster! The lesson? Never buy a product because of nice market materials.

Comments
RSS
The Watchman  - Scam   |220.255.7.201 |2010-08-31 21:29:54
Buying Endowment or Wholelife is like that. It is at the mercy of the insurance companies. It is one sided affair. The 3.56% is not the end. In the next 30 years which is a long time many things can happen. I bet this policy can ever reach its maturity.
Anonymous   |220.255.7.211 |2010-08-31 21:42:16
The lesson? Never buy insurance-related products for savings purpose, unless you already got too much money and don't mind just keeping pace with inflation i.e. no change in real value at all. Many customers actually lose out to inflation (e.g. 2.5% IRR for 15-yr, 20-yr policies) or even get back less than they paid.

Also never trust BIs, even though they look official and mandated by MAS. Some people told me that BI stands for Bullshit Info. Only 2 things "guaranteed" in the BI --- the guaranteed surrender or maturity value (provided the insurance company still alive) and the distribution costs (which goes to your sincere agent). All other stuff in the BI is hantam-bolah, can-can cannot-cannot.

A realistic estimate is to take the average between the guaranteed amount and the amount under the 3.75% column. Some people even just look at the guaranteed column. This filters out a lot of crap policies, as many of them have BIs that show guaranteed negative value i.e. the guaranteed amount is LESS THAN the total premiums paid even at maturity or even after 30 yrs of paying.
Only registered users can write comments!

3.26 Copyright (C) 2008 Compojoom.com / Copyright (C) 2007 Alain Georgette / Copyright (C) 2006 Frantisek Hliva. All rights reserved."
 
< Prev   Next >

New to us?

Learn how you can fully benefit from this massive website: HERE