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Quick Guide to Understanding Endowment Plans in Singapore

In Singapore, most endowment plans are offered as part of whole life insurance plans which usually cover you till the end of your life. An endowment plan is often much more expensive than other types of insurance like health insurance and even term insurance, but it has the potential to grow the money which you’ve forked out for it.

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What Is An Endowment Plan?

An endowment policy is somewhat like a savings or investment component of a whole life insurance plan. Some insurers offer endowment policies as part of their whole life insurance plans while others offer investment-linked policies (ILP) instead. Due to the nature of endowment policies, some people see their whole life policies as an investment/savings plan instead of just being a plain old protection plan, because of the characteristics of the endowment policy component. These features are considered “additional”, which make whole life insurance more expensive than term insurance.

How Does An Endowment Plan Work?

Endowment policies can be a beneficial way to help you build up financial discipline since the savings component is built into the monthly insurance premiums. So picking a suitable endowment policy may be a crucial step to a better savings plan.

To get you started, let’s use an example to illustrate. Assuming that you’re paying a monthly insurance premium of $250 for your endowment policy, and out of this amount, $100 might go into the insurance protection component, while $150 will go into the savings component.

For the next 15 years, you’ll fork out about $45,000 for a sum assured of $100,000. The insurance coverage will continue for the rest of your life even after your payment of premiums stops at age 50. After 15 years, you will likely be entitled to some accumulated cash value (depending on your insurer and your policy wording) if you surrender your policy upon reaching 65 years old.

Coverage

The coverage that an endowment policy provides is pretty extensive as it usually covers you for death, terminal illness and sometimes total and permanent disability (TPD) with a coverage period of up to end of life.

As the main objective of an endowment plan as part of a whole life insurance policy is to provide overall protection and the potential to grow your savings, you can expect to receive some cash benefits.

While some policies enable you to withdraw a certain amount of money per year after your policy acquires cash value, others such as retirement savings plans, include a non-guaranteed bonus portion on top of the guaranteed cash payout amount.

Payout assured and bonuses (upon death)

In the event that you die or get diagnosed with a terminal illness, the policy will pay out a benefit that is typically 105% of the premiums paid (up until the death) and any accumulated bonuses you have. The terminal illness benefit will be paid as a lump sum as an extension of the death benefit.

Guaranteed cash value

The guaranteed cash value will be the guaranteed amount of your policy, which excludes the non-guaranteed bonuses you've accumulated during the duration of the policy. The maturity value is also another form of guaranteed cash value you’re entitled to receive when your policy matures, which consists of the guaranteed sum and all the non-guaranteed bonuses (if you have a participating policy).

Non-guaranteed bonuses

In addition to your guaranteed cash value as mentioned above, you may or may not get these non-guaranteed bonuses. There are two types of non-guaranteed bonuses: reversionary bonuses and terminal bonuses, and these bonuses are affected by factors like the performance of the investment fund, the expenses incurred by the participating fund and death or sickness claim payouts for policies participating in that fund.

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Things To Consider Before Buying An Endowment Plan

There are a couple of things to keep in mind while choosing a whole life insurance with an endowment policy component. This is a costly decision with quite a long-term impact as whole life insurance plans' premiums generally cost 10 to 12 times more than term life insurance plans' premiums as they effectively cover you for a longer period of time (up to age 99, 100, or death depending on your policy). So here’s a handful of important aspects to consider before you make the purchase of a lifetime.

100% capital guaranteed

Not many insurers out there offer this attractive feature like the Manulife Goal 10. It provides you 100% of your capital back when your policy matures. Picking such plans can help you avoid losing savings in the long term as you may get guaranteed payouts which are less than the total premiums you paid over the years.

Total distribution cost

This total distribution cost is actually part of the premium you paid and it is essentially the cost that your insurer paid to its distribution channel. It helps to know this cost, which is the amount you paid for the convenience of getting advice from a preferred financial advisor, so that you won’t be overpaying for a particular service.

Limited pay period

An endowment plan with a limited pay period means you’ll only have to pay premiums for a limited number of years in exchange for a lifetime’s coverage.

So the insurance coverage will continue for the rest of your life even after your payments of your premium ends at a certain age that is agreed in your policy terms with your insurer. Depending on your insurer and plan, you may also be entitled to some accumulated cash value in the event you decide to surrender your policy when you reach a certain age as per your policy’s terms and conditions.

Surrender value

Unlike a term life insurance plan which you will not get anything if your policy is surrendered early, an endowment plan usually will give you some cash value back, in terms of guaranteed and accumulated non-guaranteed bonuses if there are any.

The surrender value is the amount you'll get when you choose to terminate the policy early, and the surrender value will typically be lower than the premiums you paid. There are two portions to the surrender value in a participating policy, the guaranteed and the non-guaranteed portion.

Accumulated bonuses

Accumulated reversionary bonuses are added regularly to your policy. This form of accumulated bonus increases your total sum assured.

On the other hand, accumulated terminal bonuses are added once your policy matures, or when you make a claim or surrender the policy. It is calculated on top of the reversionary bonus. You should check with your insurer on this, or refer to your policy documents which will usually state a numerical value for the reversionary bonus that your insurer provides.

Avoid withdrawal before policy matures

Some insurers will offer an option to reinvest your cash benefits at a certain percentage after your endowment policy acquires cash value over the years. This percentage rate is the prevailing rate and may be changed, so if you have a retirement plan or an education plan, where the cash payouts are integral to the policy, it is much better to reinvest the cash payouts.

This is because as you withdraw from your policy, you are decreasing the sum assured and effectively decreasing the total amount you will receive when the policy matures.

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Which Type Of Endowment Plan Is For You?

With so many insurance companies promoting their own range of whole life insurance plans with endowment policies, you may get a little overwhelmed with the plethora of choices. Fret not, we’ve the legwork for you and here’s a round-up of our 5 recommended endowment plans in Singapore.

A whole life insurance plan with an endowment policy component by AIA, this covers you for death, total and permanent disability (up to age 70), and critical illness (optional, up to age 100). There’s even an add-on option of 2X, 3X, or 5X multiplier (up to age 65 or 75) to increase your lump-sum payout if your children or other dependents may still be financially reliant on you. Non-guaranteed bonuses are also given depending on the performance of the funds your premiums have been invested in.
Designed for younger generations, AXA Life Treasure is a flexible endowment plan that offers guaranteed cash payouts with coverage for death and terminal illness up to 24 years old. There are 4 endowment policy plans for you to choose from - 15, 18, 21 or 24 years and you’ll receive an annual guaranteed cash payout of up to 5.50% of the sum assured from the end of the second policy year to the year before your policy matures. You can opt for extra protection and payment of lower premiums in the event of disability or certain types of critical illnesses with optional riders with waivers for future payments.
As the only whole life insurance cum endowment plan in the market to offer guaranteed lifetime benefit of up to 4 times of your basic sum assured for death and critical illnesses, China Taiping I-Secure is another option that is suitable for younger individuals. They offer premium payment terms of 5, 10, 15, 20 or 25 years with optional riders covering up to 161 medical conditions – some of which are valid for waivers in the event your spouse is diagnosed with a terminal illness, total permanent disability, or have unfortunately passed on.
Known for its limited pay period feature, NTUC Income’s Gro Power Saver is a 10-year endowment plan where you pay premiums for only the first three years of your policy with Premium Privilege. You’ll be entitled to receive 105% of all net premiums paid and 100% of bonuses, in the event of death or terminal illness.
A two-year, single premium endowment plan which gives you a potential return of 3.54%, Manulife Goal 10 ensures that you’ll have 100% of your capital back upon your policy’s maturity. You’ll not only be covered against death, at 101% of your single premium, but you’ll also receive a guaranteed return of 3.39% upon your policy’s maturity.

Advantages And Disadvantages Of Endowment Policies

Advantages

  • Longer coverage, almost a lifetime coverage
  • Dependents can benefit by enjoying lower premiums when getting insured from a younger age
  • Accumulates cash value over the years
  • Offers guaranteed sum of cash payout
  • Non-guaranteed bonuses
  • Investment opportunities

Disadvantages

  • Higher premiums
  • Lower yields compared to ILPs
  • More costly than a savings plan without life insurance component

Endowment Plans vs ILPs (Investment-Linked Plans)

Unlike endowment insurance policies, ILPs usually do not come with guaranteed values. The savings component of an ILP will be replaced with an investment component whereby a percentage of the premiums go into purchasing units in investment funds.


The value of the ILP is dependent on the performance of the fund you’ve bought into. There’s a higher risk involved as compared to endowment insurance plans but some prefer ILPs because of the opportunity to invest and have financial protection through a single financial product. 


Moreover, there’s a range of funds to choose from that caters to different investment objectives and risk appetite. Whether you choose to get an endowment plan or ILP, you’ll have to be clear on how your decision will fulfil your financial objective and if you can afford the long-term costs involved. If you;d like to know more about the differences between the endowment plans and ILPs, you may read more about it in our Life Insurance in Singapore article.

Best Short Term Endowment Plans

This is one of the shortest endowment plans around with only a two-year period single premium endowment plan which gives you a potential return of 3.54%, Manulife Goal 10 ensures that you’ll have 100% of your capital back upon your policy’s maturity. You’ll not only be covered against death, at 101% of your single premium, but you’ll also receive a guaranteed return of 3.39% upon your policy’s maturity.
With a slightly longer policy life of 3 years as compared to Manulife Goal 10, Gro Capital Ease gives you a guaranteed return of 1.82% p.a. and a guaranteed maturity benefit of 105.56% of your single premium insurance savings plan at the end of your endowment policy. This plan by NTUC also provides coverage against death and total and permanent disability (TPD before age 70), and offers you the option of paying your premiums using Supplementary Retirement Scheme (SRS) funds.
As the name suggests, Tokio Marine's Save 5 (II) is a 5-year endowment plan that covers you against death at 101% of a single premium while offering you a non-guaranteed return of up to 2.25%. Moreover, you’ll receive 4 annual dividends from the end of the first year plus a terminal dividend upon your policy’s maturity.

Best Long Term Endowment Plans

AIA Guaranteed Protect Plus III offers you coverage for death, total and permanent disability (up to age 70), and critical illness (optional, up to age 100). You may choose to add a 2X, 3X, or 5X multiplier (up to age 65 or 75) to increase your lump-sum payout while your dependants may still be financially reliant on you. You may also enjoy non-guaranteed bonuses depending on the performance of the funds your premiums have been invested in.
A whole life insurance and a flexible endowment plan, AXA SavvySaver (II) covers you for death and, terminal illness, and total permanent disability up to 6999 years old. With this plan, you’ll be guaranteed a cash payout for up to 5.50% of the sum assured or you can choose to accumulate the payouts to receive a higher lump sum at the end of your policy term. There’s even the PremiumEraser Total which you can opt to add on so that in the event of critical illness or total and permanent disability (on and before age 70), future premiums of your basic policy will be waived. There are 3 riders ranging from accidental death, disability cash, critical illness, early critical illness, and premium waiver riders for you to customise your plan to suit your lifestyle needs.
Manulife LifeReady Plus is a whole life insurance plan covering death, terminal illness, and total permanent disability – with the option for you to multiply your total sum assured up to 5 times (only until 70 years old). There are riders available, namely critical illness (CI rider), early critical illness (ECI), annual payouts, retrenchment benefits, and a health advantage benefit for premium discounts.
Ensuring you’ll be insured until you’re 70 years old, NTUC Star Assure is a whole life plan covering death, total permanent disability, and terminal illness. You can choose to multiply your base sum assured up to 5 times until the age of 70. Usual riders such as critical illness, early critical illness, cash income replacement for hospitalisation, and premium waivers are available. However, a distinct feature of this plan is the Advanced Assure Accelerator rider, and Major Impact Benefit which covers you for unknown diseases such as COVID-19.
Tokio Marine's Legacy LifeFlex is a whole life insurance plan covering you for death, terminal illness, and total permanent disability. The amount that you choose to be assured for can be multiplied by up to 10 times until you are 65 years old. You get to choose to pay your premiums over a 10 to 25 year period – after which you stop paying but continue to enjoy the coverage. You may also get to receive non-guaranteed annual payouts in the form of dividends from 65 years old onwards. Finally, you get to choose to add critical illness, early critical illness, premium waiver, spouse benefit, and kids riders to your plan.

Frequently Asked Questions

What is 100% capital guaranteed?

It is a feature of an endowment plan that provides you 100% of your capital back when your policy matures.

Are short term endowment plans better than long term ones?

Yes and no. It really depends on what your financial goals are. Let’s say you’re just looking for alternatives to savings accounts, fixed deposits and even Singapore Savings Bonds (SSBs), short term endowment plans may give you more returns than bank accounts, plus you get some insurance coverage.

On the other hand, if you’re trying to save up for your child’s education, or to prepare for your retirement, a long-term endowment plan may be more apt, but bear in mind that it requires a much longer period of commitment, and being able to regularly pay the premiums for the entire policy term.

What are guaranteed cash values and non-guaranteed bonuses?

Guaranteed cash values will be the guaranteed amounts of your policy or policies, which excludes the non-guaranteed bonuses you've accumulated during the duration of the policy. Non-guaranteed bonuses are added regularly to your policy. This form of accumulated bonuses increases your total sum assured.

Are there waivers for endowment plan premiums?

Yes, there are optional riders available for many endowment plans, which you can opt to add on to your base plan so that in the event of critical illness, total and permanent disability or other conditions, the future premiums of your basic policy will be waived.

How do I know if my endowment plan has a limited pay period?

You may check with your insurer or read the terms and conditions of your endowment policy. It should state that your endowment plan with a limited pay period means you’ll only have to pay premiums for a limited number of years in exchange for a lifetime’s coverage.

What will happen if I surrender my endowment policy earlier than the end term?

You’ll receive the “surrender value”, which is the amount you'll get when you choose to terminate the policy early, and the surrender value will typically be lower than the premiums you paid. There are two portions to the surrender value in a participating policy, the guaranteed and the non-guaranteed portion.