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When we were young, we have been taught about the importance of saving. As a child, our main instrument for saving could have been a piggy bank or a simple joint bank savings account with our parents. When we start working, we transit into using solutions such as our own personal bank savings accounts, where our salaries are also credited into.
The problem, however, with bank savings accounts is that they are not just instruments used for saving, but also for spending. When we withdraw cash from an ATM, money is debited from our bank savings accounts. Each time we pay our credit card bills, funds are used from our bank savings accounts as well. These make our bank savings accounts more of a transactional account, rather than an account we can use to accumulate our savings. Furthermore, interest rates on many bank savings account in recent years have been very low and earn us correspondingly low returns.
As we become older and take on more financial responsibilities for ourselves and our family, it becomes even more essential for us to find effective ways to continue saving for various needs we have. One such product that we can consider would be an insurance endowment plan.
What Is An Insurance Endowment Plan?
As the name suggests, an insurance endowment plan is a policy that can help us to save for important milestones that we may have. These could include upgrading our homes, starting a business or precious gift for our children.
The idea behind an insurance endowment plan is that we commit to pay a fixed policy premium (e.g.: monthly, quarterly, annually) over the premium payment term (e.g.: 5, 8 or 10 years), in order to receive a potential lump sum payout upon policy maturity (e.g.: in 16 or 18 years).
Insurance endowment plan is typically tagged to some important milestones that we are working towards. For example, if I am thinking of enjoying early retirement to travel around the world when I am 50, I can plan today when I am 34 via an insurance endowment plan which will reach maturity in 16 years, hence giving me the funds that I need to fulfil my goals.
At the same time, it’s important that we understand what an insurance endowment plan isn’t. For a start, it isn’t a bank savings account. So, it’s not an instrument that we can park our emergency savings funds with. This is because unlike a regular bank savings account, we can’t choose to withdraw funds as and when we want to, without incurring some form of charges. Similarly, we can’t top up the premium using our excess funds (e.g.: bonus, sale of property) into our insurance endowment plan whenever we want.
An insurance endowment plan isn’t an investment-linked insurance policy (ILP) where policyowner might potentially lose the entire value of ILP, including all premiums paid. In contrast, the risk for insurance endowment plan is limited since policyowners are protected from the risk of losing their capital upon policy maturity.
Manulife GrowSecure – An Insurance Endowment Plan That Helps Us Accumulate Savings Over The Medium Term Horizon
An example of an insurance endowment plan that we can consider is Manulife GrowSecure.
As seen in their brochure, there is an example of an individual, Alex, age 32, who decides to buy a Manulife GrowSecure plan with a monthly premium of S$400. This monthly premium is paid over a period of 10 years, with the policy maturing when he reaches age 50 (18-year plan). In total, Alex pays a premium of S$48,000.
Based on the illustrated investment rate of return of 4.25% p.a., the total potential maturity value would be S$71,155. This comprises a guaranteed maturity value of S$48,426, and a non-guaranteed maturity value of S$22,729. If based on the illustrated investment rate of return of 3.00% p.a., the non-guaranteed maturity value would be S$13,066 and the total potential maturity value would be S$61,492 (that is, S$48,426 plus S$13,066).
Source: Manulife GrowSecure product brochure
Manulife GrowSecure is 100% capital guaranteed at policy maturity1. This applies regardless of the performance of the participating fund.
While the returns we get from an insurance endowment plan such as Manulife GrowSecure may not be as high as investing in stocks, mutual funds or ILPs (assuming the markets perform well), it could still be a relevant financial solution to grow our savings without having to assume the generally higher risk associated with equity and mutual funds investments.
In addition to building our savings over time, Manulife GrowSecure also provides us with insurance coverage that can protect our loved ones. The life insured will be covered upon death2 or if the life insured suffers from terminal illness2. Upon death, the payout amount is pegged to 105% of the total premiums we have already paid into this plan, and any bonuses (if applicable). The policy also pays a benefit amount upon terminal illness diagnosis.
On top of that, Manulife GrowSecure also provides an additional payout of 50% of total premiums paid to date in the event of accidental death3 of the life insured before age 80.
We can also get additional protection with optional supplementary benefits if we want.
Some Other Highlights of Manulife GrowSecure
If it’s not already obvious by now, purchasing an insurance savings endowment plan is a long-term financial commitment. The good thing about Manulife GrowSecure is that your premiums are protected and you may receive a lump sum payout with up to 3.36% p.a.4 returns upon maturity.
Given that the policy term for Manulife GrowSecure is 16 or 18 years, this plan would not be suitable for someone who is looking for a short-term endowment plan. In addition, policyowner has the flexibility to choose from 3 premium payment terms (5, 8 or 10 years).
Regardless of the policy term and premium payment term, commitment is required on the policyowner to pay the premiums during the payment term, and to subsequently hold the plan till maturity to reap maximum benefits from the plan.
For those who are worried that they may not be able to pay the premiums, the good news is that Manulife GrowSecure has a “Premium Freeze5” option that allows the premium payments to be put on hold in times of need.
Furthermore, Manulife GrowSecure also offers a waiver of future premiums2 if the life insured suffers Total and Permanent Disability (TPD) during the premium payment term (before the life insured turns age 70) while the policy continues.
The key thing here is that before we purchase any insurance endowment plan, we must have the intention to pay the regular premiums required, and to hold the plan till maturity in order to reap the financial benefits of the plan.
If we do not intend to do so, then such an insurance endowment plan may not be suitable for us and we should consult our Financial Consultant for other solutions that would better fit our requirements.
You can find out more about how Manulife GrowSecure works in the product brochure.
Get in touch with Manulife to find out more.
Footnotes
1 Not applicable for policies which have been altered.
2 Please refer to the Product Summary and Policy Contract for more details.
3 If there is a reduction in the sum insured, the total premiums paid to date used for the accidental death benefit calculation will be based on the reduced sum insured from the start of the policy.
4 This is based on premium payment term (5 years), policy term (18 years), at an illustrated rate of returns of 4.25% p.a.. Based on an illustrated investment rate of return of 3.00% p.a., the total potential returns will be 2.23% p.a..
5 Provided the policy has been in force for 2 policy years with 2 full annual premium payments and subject to approval by Manulife.
Important Notes
Manulife GrowSecure and its supplementary benefits are underwritten by Manulife (Singapore) Pte. Ltd. (Reg. No. 198002116D). This advertisement has not been reviewed by the Monetary Authority of Singapore. Buying a life insurance policy is a long-term commitment. There may be high costs involved if you terminate the policy early, and your policy’s surrender value (if any) may be zero or less than the total premiums paid. This material is for your information only and does not consider your specific investment objectives, financial situation or needs. It is not a contract of insurance and is not intended as an offer or recommendation to purchase the plan. You can find the full terms and conditions, details, and exclusions for the mentioned insurance product(s) in the policy contract.
This policy is protected under the Policy Owners’ Protection Scheme which is administered by the Singapore Deposit Insurance Corporation (SDIC). Coverage for your policy is automatic and no further action is required from you. For more information on the types of benefits that are covered under the scheme as well as the limits of coverage, where applicable, please contact us or visit the LIA or SDIC websites (www.lia.org.sg or www.sdic.org.sg).
We recommend that you seek advice from a Manulife Financial Consultant or our Appointed Distributors, or visit any DBS/POSB Branch before making a commitment to purchase a policy.
Information is correct as at 22 February 2022.
Brought to you by Manulife Singapore.
Photo by Towfiqu barbhuiya on Unsplash
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