Endowment policy vs investing it yourself Skip to main content

Endowment policy vs investing it yourself

Many bankers and insurance agents tried to sell me endowment policies.  I have never believed in this type of policy. It has got to be the worst payback vehicle ever, i think worse than Singapore savings bonds!  They sell it on the basis of fear, what if this you're dead, who will take care of your kids education, blablabla bullshit.

Lets put the numbers to the test, i think it's pretty straightforward.  Assuming i'm still around to send my kids to college after 18 years.  I've done 2 scenarios based on $200/month and $800/month contributions.

Endowment policy: Guaranteed payback at 2% p.a.  It's what they sell you.


Investing it with OCBC BCIP (i'll do a separate post on this): Target interest 4% p.a with dividends, and i still own the shares.


The difference between the 2 plans is astounding! With DIY investing (OCBC BCIP) I'm about $11k ahead based on the $200 scenario, $45k ahead based on the $800 scenario, and I still own the shares and will be paid dividends after the endowment policy timeframe lapses. You can argue that i can purchase shares with the endowment funds after the policy matures, but that defeats the point of dollar cost averaging and dividend investing.

Serious no-brainer, unless you lead a dangerous life living year to year.  Most white-collared workers who maintain a healthy lifestyle do not need to invest in endowment policies. 
Labels:

Comments

Post a Comment

Popular posts from this blog

Hotel Review: Novotel Halong Bay

As I travel quite often for work, I’m going to keep a record of all the hotels I’ve stayed in, to serve as a reminder of what works and what doesn’t. It’ll make future bookings much easier. Unfortunately there was no SPG/Marriott hotel in Halong Bay area, so i ended up with Novotel. Location: Along the western side of Halong, right across some ongoing construction. Room: Decor is dark wooden, taking a spin on modern Chinese. Wood flooring and a huge king size bed that's abit hard and uncomfortable. I like the decor though. Gym: This has got to be the saddest hotel gym i've ever seen. I decided to run outside instead. Breakfast: The selection is so limited, and it's not even that good. Nice decor though. Would I return? Definitely not to this 4 star hotel. Thankfully I was only here for 1 night. Although the place is filled with Korean tourists, you can eat some basic Korean breakfast here, but that's not my preference.
Post a Comment
Read more

I increased my term + accident insurance policy with Aviva

I recently maxed out the SAF Aviva group term insurance on both term life plan for $1M and accident plans for $600k, which costs me $47.42 and $77.37 per month respectively. This is on top of my existing  whole life plans . I did this to ensure adequate insurance coverage in times of need. The only downside of this is that Aviva pays out a maximum of $20M per event, and it's prorated accordingly, so don't bet your house on this and have some other backup. Term covers up to age 65-70 (your income generating years), and whole life covers your whole life (including your retirement years). In general whole life plans are alot more expensive per $ of coverage, compared to term plans, so you have to utilize both to get adequate coverage at a reasonable cost. In Singapore where voluntary death isn't an option, it could really bankrupt a family. Some say to purchase a $1M term plan that covers you up to age 99. That means you can't live past 99, but such plans are...
Post a Comment
Read more

Purchasing life insurance

I recently re-balanced the family's insurance schemes. I remember just when i was just starting out, my cousin once told me to buy only Term + Critical illness insurance. I didn't listen and bought an investment linked plan from one of my friends (he played the friend card, which is annoying). They guarantee you 3% returns or something similar, along with coverage. I bought the Manulink Flexi plan on Nov 1 2008, and had it for 89 months (7years, 5months). Monthly premium was $206.59. Total Premium paid was $18386.51. I remember getting back only around 11k when i surrendered this policy. Basically I paid $7386.51 in total for term + critical insurance coverage for the 7+ years, about 1k per year. Looking back, i did not require such coverage as i didn't have any dependents. Lets see the figures comparing what i would've otherwise gotten, had i invested in a stable dividend stock/reit, since the premise is that this policy is not necessary. I'm looking at a t...
Post a Comment
Read more