Endowment Insurance Made Simple

Endowment Insurance Made Simple

Endowment refers to a type of investment, defined by its strict guidelines and its likeness to a savings account. It is a tool which can help you get through life. Keep reading to find out exactly how endowment can help you!

How is endowment connected to insurance?

There are basically two types of life insurance: with an endowment plan or without an endowment plan. A life insurance policy which has an endowment plan attached to it means that some of the premiums you pay become savings. The life insurance policy will have an expiration date. At the end of the policy’s timeline, the policy has matured, and it is at this point that the accumulated savings can be collected.


Endowment life insurance policies are a way for you to receive predictable and guaranteed returns. They can be used to save up for major life events such as buying a home, paying for your children’s education, or retirement. Because there is also a life insurance component, you’ll be covered if something untoward happens to you.


Are endowment policies safe?

Letting an insurance company take and invest your money over a long period of time can feel a bit risky. What if the insurance company went bankrupt? What if there is a financial crisis in Singapore? These scenarios can happen, but none of them will affect you as a policyholder. In Singapore, a Policy Owners Protection Scheme (PPF Scheme) has been set up under the Monetary Authority of Singapore. All policies bought from insurance companies who are registered with the PPF Scheme are protected in case of bankruptcy or a financial crisis.


Bankruptcy and financial crisis are of course extreme scenarios, but there are less extreme cases to be considered as well. For example, how do I know that the insurance company will invest correctly so that I get positive returns? Endowment policies always have a guaranteed and a non-guaranteed component. The guaranteed component is the return you will get regardless of how well (or not well) the insurer has invested. The non-guaranteed component represents the excess return. If the insurer has invested better than what the guaranteed component states, this return will be reflected in the non-guaranteed component.  It is paramount to bear in mind that the guaranteed component for some policies may be lower than the sum of all premiums paid.


In addition, some policies will pay the final guaranteed component even in the case that you pass away or suffer a total and permanent disability before the policy has matured. This offers extra protection for your loved ones, which a regular life insurance policy does not.


How do I know if this is for me?

Endowment life insurance plans allow you to kill two birds with one stone, figuratively speaking. On the one hand, you get life insurance, which acts as a safety net for your loved ones should you suddenly pass. On the other hand, you get an obligatory savings account. Talking about savings and planning your savings is easy, but actually saving can be much more difficult. With an endowment life insurance plan, the call to action is partially taken out of your hands.


It is crucial to note that committing to an endowment plan, and then canceling it before the maturity date, can result in an unprofitable situation. The fine for canceling the plan can be quite large. Therefore, make sure that you are going to have a stable income and will be able to pay for yearly premiums until the maturity of the policy. Many plans, like ManuLife ReadyPayout Plus, offer several choices of policy terms. This means that you have the flexibility to choose when the policy will mature and can plan your private economics accordingly.


Buying an endowment insurance plan for your children is another option. The pay-out at the plan’s maturity could help to pay for your child’s education or other important life events. In the unfortunate event that you pass away before the maturity of the policy, your children can still receive the guaranteed component of the endowment and the sum assured on the life insurance plan. A traditional savings account does not provide this type of protection for your family. A plan such as ManuLife Educate ensures that your children will be able to fulfill their dreams even if your life is taken prematurely.


How do I go about obtaining endowment life insurance?

It’s only a click away! Once you’ve purchased a policy via PolicyPal, all of the policy details will be automatically stored in your account. With the PolicyPal app, you’ll be able to see all of your coverages and premiums in one place! You can even upload any other insurance policies that you have onto the same platform to ensure no piece of vital information is forgotten.

Insurance is too important for us to not quite know where all the details are located; therefore, take control of the situation today!

Have any burning questions about insurance or looking for some useful insurance tips? Learn, ask and share with PolicyPal Insurance Community today!

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