This article first appeared on fundMyLife, the platform that connects you to the right advisers.
Endowment plans can evoke quite strong feelings of either hatred or love. When used properly at the right time in your life, it is a good way of saving over a period of time to achieve certain financial goals upon maturity. However, when used inappropriately at the wrong time instead, you end up paying the premiums begrudgingly with seemingly no end in sight.
In a previous article, we mentioned that selling your endowment plan is a viable option if you want to get out of this expensive ride. It’s a decision that can help you make the best out of the worst of situations.
But before you decide that you can’t wait to get rid of your endowment plan, take some time to examine your policy details, get an updated benefits illustration from your insurance company, and see if it can still align with your current financial goals and cashflow situation.
If you do choose to go ahead with selling your endowment plan, it is a relatively fuss-free experience to sell your endowment plan(s), though you should take note of a few things.
How Long Before Your Plan Hits The Next (Meaningful) Milestone?
It sounds like a bad question, but can you afford to hang onto the plan? If you’re selling it because you have a sudden expense, debt, or lack of liquidity, that is a strong case for selling it. However, if you can afford to hang on to it just a bit more for a couple of years, you might lose less money, since the percentage gap between premiums paid and surrender value closes as it approaches maturity.
In addition, there is a point in your endowment plan called the break-even point. It is a point where the payout value is equal or almost equal to the total premiums paid. By selling your policy at the break-even point, you can immediately exit and not lose too much money, inflation notwithstanding.
Compare Quotes And Check Eligibility
Buyers often look for relatively more profitable endowment plans that have a few years left before maturity. On top of that, there are currently several companies in Singapore which can buy over your plan so it’s good to compare quotes unless you’re in a great hurry for the money. In addition, these companies are looking for good returns after all so if your policy’s returns are too low, you have to brace yourself for rejection.
Furthermore, policies which were paid using CPF or SRS are not eligible. If it was, you’d have more people trying to sell their endowment plan to get CPF money out. Hahaha. No.
Look At Insurance Protection
Last but not least, after you sell your endowment plan, make sure you have adequate insurance coverage. Chances are, your product might have some protection component built in it. However, now that you’re going to sell it, it’s prudent to check if you need to make up for it in some other ways. You should talk to your financial adviser to discuss your next options.
Otherwise, there’s you can always use fundMyLife, a handy platform to ask your financial planning questions.
Once all that is done, don’t forget to cancel any automatic premium payment if you set up any standing instructions with the banks.