Worried about finding higher yields in savings accounts in this low interest rate environment? You no longer need to settle for low-yield bank savings accounts, with insurers like Singlife, Singtel Dash and Gigantiq coming up with insurance savings plans that not only have more attractive yields, but also insurance protection from death and TPD (total permanent disability).
What makes these plans particularly interesting, however, is that they have no lock in period. This means you are not required to keep the money in the savings account for a fixed amount of time like a fixed deposit.
For fresh graduates or working professionals on a tight budget, this could be a good chance to dip your toes in the waters and let your money work for you. It is a good head start into personal financial planning without much capital outlay. Later on, with additional needs like housing or dependants, you can add insurance plans with higher and more extensive coverage into your insurance portfolio.
Comparing Insurance Savings Plans With High Yield Savings Accounts And Fixed Deposits
Recently, many banks have lowered their interest rates on their high yield savings accounts. For example, Standard Chartered recently announced that from 1 Jan 2021, the interest rate for the JumpStart account for account balances up to $20,000 will drop once again to 0.40% p.a., down from 1% p.a. and from 2% p.a. a year before. With that, high yield savings accounts no longer seem to be an attractive proposition as a “race to the bottom” becomes clear.
As for fixed deposits, banks such as DBS are offering a fixed deposit with a minimum sum of $1000 locked in for 18 months with an interest rate of 1.3% p.a., not too shabby considering the current interest rate environment but the main drawback being your money is locked in for a significant period of time.
So with high yield savings accounts no longer having such a high yield and fixed deposits requiring a lock-in period, what is the alternative for achieving good yields without a lock-in tenure?
Insurance Savings Plans: Your One-Stop Shop For Savings And Insurance Needs
These insurance savings plans introduced by Dash EasyEarn, GIGANTIQ and Singlife are a combination of a regular savings plan, insurance protection, and a traditional bank account.
|Singlife Account||Dash EasyEarn||GIGANTIQ by Etiqa|
|Interest Rate||Up to 2% on the first $10,000, and up to 1% per annum on the next $90,000||1.8% p.a. for the first year (or 2% p.a. if you signed up before 24 Sep 2020)||1.8% p.a. (first year) for first $10,000
1% p.a. (first year) for amounts more than $10,000
|Minimum Amount||$500, need to maintain at least $100 in account to receive interest||$2,000||$50, top up anytime|
|Withdrawal Fees||No service, withdrawal or surrender fees||Multiples of $100 with a $0.70 fee per withdrawal||$0.50 fee for credit to DBS.
$0.70 fee for credit to PayNow.
|Death Benefit||105% of account value||105% of account value||105% of account value|
|Additional Benefits||Includes complementary VISA debit card
Earn a bonus 0.5% by spending $500 on your SingLife Visa debit card
Retrenchment benefit: Up to $10,000 over 3 months
|Additional insurance coverage for COVID-19 including hospitalisation benefit, intensive care unit benefit and death benefit||Earn additional interest for each protection plan purchased under Etiqa
Singlife Account: Attractive Returns and Bonuses
Of the 3 insurance savings plans, Singlife has the highest (non-guaranteed) interest rates, up to 2% per annum (p.a.) on your deposits, limited to the first $10,000. On the next $90,000, you’ll earn 1% per annum.
One of the more interesting features is the retrenchment benefit which you can tap on. This benefit allows you to claim up to $10,000 over three months, should you become unemployed for four months or more. The actual benefit you can claim is dependent on your spending habits: it is the average spent from your Singlife Card over the last six months of employment.
You also get a complimentary VISA Debit Card that is linked to your Singlife account with no annual fee or foreign exchange charges.
Since 1 November 2020, Singlife has also introduced their ‘Save, Spend, Earn’ campaign, allowing customers who spend $500 per policy month on the Singlife Visa Debit Card to qualify for a bonus 0.5% p.a. return, on top of the new base return of 2% p.a. This gives Singlife account holders the chance to earn 2.5% p.a., the highest amongst the options on this list.
Take note that in order to earn interest, your account value must be at least $100. You will need to download the Singlife app for you to apply for this plan.
Singtel Dash EasyEarn: Higher Barriers To Entry, Lower Maximum Amount
EasyEarn is advertised as paying out 1.8% per annum in the first year (as of 25 September 2020), putting it in the range of similar competitors offering insurance savings plans. What gives EasyEarn higher barriers to entry would be the minimum single premium of at least $2000, which would be significantly more than what its competitors are currently offering.
The plan also gives you the chance to be covered for COVID-19 insurance. The coverage includes hospitalisation benefit, intensive care unit benefit and a $50,000 death benefit. You will need to download the Singtel Dash app for you to apply for this plan.
GIGANTIQ by Etiqa: Easy Access, Options To Increase Interest
Etiqa has the most easily accessible plan, requiring just $50 to register an account. This would be ideal for most first-time users who want to dip their toes into such a plan but are on a tight budget.
The interest rates offered under GIGANTIQ on your first $10,000 for the first year are as follows: guaranteed 1% p.a. and 0.8% p.a. bonus. The option to offer guaranteed interest rates makes this not only an accessible plan but an attractive one too, knowing that your money will definitely earn interest in spite of any market movements.
You also have the option of earning additional interest of up to 0.25% p.a. on the first $10,000 for every protection plan purchased from Etiqa. These insurance plans can include home, cancer or travel insurance, and it would be good to consider this plan if you are also currently considering other forms of protection.
You will need to download the Tiq by Etiqa mobile app for you to access this plan.
The Similarities Between All 3 Insurance Savings Plans And How You Can Use Them
An important caveat to note is that these 3 financial instruments are not bank accounts but rather insurance savings plans underwritten by their respective financial institutions. This means that your funds are protected under the Policy Owner’s Protection Scheme by the Singapore Deposit Insurance Corporation (SDIC) against any unexpected crisis.
In this case, as the insurance savings plans are considered individual life policies, there will be a cap S$100,000 for guaranteed surrender value per life assured per insurer. This means that up to $100,000 that you place in the account will be insured by SDIC in the case of any insolvency or winding up of the insurer.
Each plan also insures the account holder with a life insurance coverage of 105% of the deposit in the event of death or terminal illness. This means that the more you save (up to the maximum account limit), the more you are covered for. This is, however, by no means sufficient coverage as you still need to take into account the coverage gap between the amount you are covered for and the amount you will need for your beneficiaries or yourself in the case of life-changing events such as death, terminal illnesses etc.
They also do not require a monthly premium payment, which makes it easier on your wallet for cashflow purposes. This flexibility also has its drawbacks, especially if you prefer to be covered for a fixed sum assured. Moreover, you might also not be covered for other major events such as critical illness.