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Thursday, May 16, 2013

Buying endowment plans



Lately I have been looking at some of the insurance products in the company that I'm working for, Great Eastern. The main reasons for that was because of a friend of mine who encouraged me to learn more about these products.

Here are some of the right perspective that you must set in regards to Endowment plans. Unlike other savings plan, endowment plans in an insurance company comes with a protection. This is important for those of us who look at protection at the same time. The return of the plan is reasonable. Unlike other savings plans like FD, endowment plans force you to create a habit if saving a portion of your money. The plan that I was looking at is known as Great Wealth Accumulator.

By savings about 1800(minimal, depends on underwriting, your age and risk, as this is insurance related) per year, you will start getting a certain amount at the second year. (Guaranteed and non guaranteed portion). The non guaranteed portion depends a lot on the company performance. So far, the company has a nice record when it comes to the company performance.

Above is only a sample illustration. Please refer to the insurance agent or for the sales quotation by the company

Above is the sample quotation. The performance bonus that I used here is when the company performance earn 7% per annum. (Good performance).

So basically, you will be getting a bonus of about 1000 each 2 years, as you save the RM1800. Of course, you must understand the compounding effect of the RM1800 you put into FD. For the next 10 years, the FD will definitely bring a better rate of return, but what makes endowment plan attractive is at the maturity date, for your retirement and protection.

Besides that, you only need to pay for 20 years or 15 years...after that, you will be getting a yearly bonus.

Above is only a sample illustration. Please refer to the insurance agent or for the sales quotation by the company

By looking at the above, you can see that the benefits really start to become apparent at the later years. Because you will be getting a bonus of about 1000 yearly after that.

My advice: take a small portion of your salary, maybe about 10% or 5% of it to be set aside for this purpose. It will help to create a culture of savings and also planning. But do take note of this. This portion of money is mainly for savings. You may reward yourself with the bonus you are getting along the way or reuse it for our investment plan and strategy. Whatever it is, you must take the first step to manage. This endowment plan is low risk and comes with protection for your life. Very suitable for those who are working in Singapore without any EPF or people who are busy at work (couldn't find time for investment, savings, etc)

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