Endowment Policy
From Financial Literacy Wiki
Endowment Policy combine insurance protection with a savings plan for the policy buyer. An endowment policy has fixed maturity ranging from 10 to 25 years, and up to a certain age limit. Endowment policy cover the insured against death, permanent & total disability and critical illness. Premiums are payable by a single lump sum or by regular installments.
Endowment policy are participating policy. Thus, the benefits comprise the sum assured and accumulated bonuses. In standard endowment policy, benefits are paid when the policy matures or when the insured dies within the term of they policy.
Endowment policy are commonly used as savings plans to meet future commitments such as retirement or children's education needs. Child education policy enables parents to build up a sum of money to fund their child's education needs. In such a policy, a parents effect the policy on the life of his child for a specified term, say 20 years (for newborns). If the child dies before the policy matures, the parent receives the benefits. A waiver-of-premium rider can be attached to the policy so that if the parents dies before the policy matures, future premiums will be waived, but the child remains protected. At maturity, the policy value can be used to finance the child's tertiary education.
Under the Central Provident Fund Investment Scheme (CPFIS), CPF members can use the balances in their Ordinary Account or Special Account to invest in endowment policy sold by CPF-approved insurance firms.
While endowment policy are allowed under CPFIS, buyers of endowment policy should examine the investment track records of insurance companies that offer such policy, and not rely only on the prospective returns projected. If you invest in a regular premium policy, ensure that you have sufficient funds now and in the future pay your premiums, in your CPF accounts. Otherwise, the policy will lapse. As such, you should take note of the changes in CPFIS policy.
Endowment policy should preferably be considered only when one have been adequately covered by term policy and whole life policy. This is because endowment policy offer less protection per premium dollars.
