Endowment Plans..

Well, when buying endowment plan, there are really plans out that that seems to be out to con our money.. Imagine, an endowment plan that gives you less than the amount you put in during maturity. The only good thing about it is that it does gives you a basic coverage in the event of death etc. At least not so bad ba.. But the whole point is.. how can the plan give you less than what you put in? This might be the case especially if the plan is bought at a high age and the plan is bought with cash back every 1-2 years. Please beware..

I had a very bad experience with AIA 'cos that's what my dad's endowment plan is. Firstly, his policy gives him a negative return and the potential returns on maturity decreases every single year. Yup, I saw it dropping every time my mum ask me to read, when I told her, she said no choice, since buy already better don't terminate. Then the policy price go up every 5 years, thanks to the 5 year level term coverage. The return, no matter how I calculate also very weird, I think it's about 1.5% or something like that. Confirm cannot even beat inflation one.

I'm not too sure about investment linked type of endowment plan but at least for those participating or non-participating endowment plan, please kindly do the following basic calculation on the returns.

Total yearly payment:

e.g. 2400 (*Please remember to add in all the riders it's normally not calculated as a set in the illustration)

Duration of plan:

e.g. 20 years

Total payment made:

e.g. 48000

Total Cashback: (if any)

e.g. 2000 * 10 (i.e. 2000 every 2 years) = $20000

Total value on maturity:

e.g. 48000

Total Profits:

e.g. $20000 (in simple calculation terms it's about 3.5% per year of interest 'cos we only divide by 10 instead of 20 as the money is not paid in 1 lump sum (Not bad ba at least better than fixed deposit.)

But this is only what our example illustrates. If your return is confirm to be what the document says it's supposed to be then it's still not too bad. At least it's a 3.5% per annual so not that pathetic. But do take note that if inflation is 3% and your return is only 3.5% it just means that your money didn't depreciates, maybe it appreciates by 0.5% per annual. So if inflation is 5%, it means that your money still depreciates by 1.5%. Do ponder over this.

Also take note and ask if the rider will increase in premiums along the years to ensure that the calculation holds in years to come. Please ensure that if your agent tells you it's level insurance they write it down at the document they pass to u and sign off as the proof.