Monday, April 6, 2015

Endowment And Insurance Saving Plan

Hi Everyone,

Recently, I have met up with one of my friends for lunch. Over the lunch, he talks about whether do I have financial planning for my future? Well he is not an insurance agent or something like that. I told him that I have just a simple financial planning for myself. I told him about my portfolio whereby 25% of my money goes to stocks and the rest of my money, which is 75% of my money, parked at my OCBC 360 account for the 3.05% interest. 

I was wondering why he asked me this question so in return I asked him back about his financial plan and why he suddenly talked about this topic. He told me that he was told by one of his insurance agent about an investment plus insurance plan where the investment will be invested in secure shares. He didnt told me about what kind of shares that the plan will be invested by I presume that it would be blue chips (Correct me if I am wrong). 

I myself have went to NTUC income to asked more about endowment plan because it is better to diversify my portfolio in this area as well. But when my girlfriend and I went down and hear the agent's explanation, we felt that it is not really that worth it. Okay, not say totally because in the end, you will be able to gain some money out of the 10 or 20 years of "investment". We did see the chart and saw that for more than first half of the investment period, we will be losing money, so in any case whereby we need cash urgently, we will be losing some of our capital. Of course, this is the penalty but would be too harsh if it eats up our capital instead of just forfeiting our interest.

Well, I do not have much understanding about endowment plan yet, but if I am going for one, it will not be for me but will be for my children so that after 20 years, my children will have enough money for his university education without me having to crack my head to pay for it. After that he/she will be on his/her own (after graduation).

So what is your view on these two plan? Will you be going for it?


  1. Hi James,

    Whether endowment or insurance/investment plan, your agent/financial advisor will get a cut on your premiums (for the first few years) as commission, that is partially why your are losing money at the beginning. There are also the guaranteed and non-guaranteed parts when the policy matured. The non-guaranteed part could be greatly diminished if the policy happens to mature during a bear market. In the end, the returns for your policy may not be better than by just placing your money in FD. As the SSB is coming soon, no need to commit yourself now.

    Perhaps get one insurance for medical coverage due to the escalating medical costs in Singapore.


    1. Hi Passive Farmer,

      Yea I have thought about that which is why I only sign up for NTUC insurance for now. But in the future I will probably get one for my kids. (well for education savings)

  2. Hi James,

    I am currently stuck at forcing myself to save $500 per month into the plan for 15 years, 11 years left. I deeply regretted it as i thought it is good but the thing is before i learnt how to invest in stocks. I tried to lower down the premium to $200/mth but the penalty of the contract is that if i lower down to $200/mth, it would be overwrited in the beginning of my savings (i.e. my 4 years of saving $500/mth = $2400 becomes $200/mth = 9600). As stated from my insurance agent that i can adjust the amount based on my comfort level before i signed the contract, but to my horror now i still have to contribute $500/mth for the next 11 years!

    The interest u get is significantly lower than getting dividends from what you have in your stocks now. I strongly recommend you to think twice about signing for an endowment plan.

    People put money into endowment plan because they don't know how to invest.

    just sharing my 5cents tragedy.


    1. Hi jfree,

      for your example, it seems tat lower your premium you would have higher payout? since 500/mth = 2400 and 200/mth = 9600, correct me if I am wrong cause I dont know much about this plan.

    2. Hi Jeffery,

      I was in a similar situation as you before. I had a savings/investment/insurance plan that required me to put in a sum of money every month, and this would be invested in a couple of funds. Mine was a 20 year plan.

      When I learnt about investing as well as read up more about this plan which I was already on, I realized that I was paying a lot of fees and getting sub-standard returns. I decided to terminate the plan with a loss of 4.5k which was already invested. Though it was painful, in my opinion it was worth it. Because I had more cash left over every month to save and invest on my own. A few years on, just the dividends received from my portfolio alone was a lot more than the 4.5k I had lost in this plan, not to mention a decent amount of capital gains so far.

      From personal experience, seeing that you are able to manage your own investments, you might want to consider terminating your plan. The amount of fees you would be paying for this plan could be far better put to use than to line the pockets of your insurance agent/company. Beware of the sunk-cost fallacy or loss aversion which might be causing you to hold on to your plan. It might be costing you a lot more in the long run. Below are some links about this for your reading pleasure.

      All the best!

    3. Hi James,

      sorry about the mistake it should be:

      I saved $500/mth for 4 years already so my savings = $24000

      if i want to reduce my monthly savings to $200/mth now it means my savings would become $9600

      means i will make a loss of $24000 - $9600 = $14400 if i were to reduce my monthly savings.

      As $500/mth is freaking alot of money and i can't reduce the monthly premium to $200 i only can thumbs up and put it into my mouth and suck it....

      never go for an endowment plan if u already got financial knowledge UNLESS you don't know where to put your money in for the next 15 years or so..


    4. Hi Halcyon,

      I felt stupid because i'm stuck over here.. maybe i could check with my friend who is my agent now whats the sunk cost if i were to terminate now.. it's really no point in saving now that i applied for yearly cashback withdrawal which means that upon my mature date, the interest gained is something that my eyes cannot see at all.. thanks for the advice!


  3. Thanks for this helpful blog...but can you please brief me about investment plan

    1. Hi Gaurav,

      sorry for the late reply (nearly a year ago as I didn't receive any notification about new comment). Not sure whether you will still read this post but I will create a post about this so that you will have a better understanding on what kind of investment plan you can go for (whether is it low risk or high risk or building funds for your kids and etc).

      Do look out for my post

  4. Thanks for sharing this helpful blog...i was looking for same this kind of content...can you please brief me about best investment plan

  5. Thank you for sharing such great information. It is informative, can you help me in finding out more detail on a Investment Insurance Plan,i am very new to this field and wanted to understand the basics of investment insurance .