Endowment buyers typically belong in three different groups. People who:
- forgot why they bought it
- know why they bought it
- didn’t know why they bought it
If you belong to the first group, go dig your storeroom for your policy and recall why you bought the plan in the first place. Go ahead and contact your insurance company to update the benefits illustration and see if it still aligns with your financial goal. On the other hand, if you belong to the second group, well done and we hope you’re on track to achieve your financial target. Lastly, if you belong to this group, you’re most likely confused and frustrated since you are paying regularly for something you weren’t sure of. Typically, members of the last group of consumers would have the strongest reasons to sell since it is a pain on their cash liquidity.
Endowment plans are like marmite
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 our 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. For the kiasi and concerned consumers, fret not – it’s perfectly legal.
While it is a relatively fuss-free experience to sell your endowment (based on real-life accounts), you should nonetheless take note of a few things. In this article, fundMyLife shares several things you need to know before you sell your endowment plan.
How long more before your plan hits a (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, it is truly understandable and you should strongly consider selling it. However, if you can afford to hang on to it just a bit more for a couple of years, you might lose relatively less; the percentage gap between premium 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 into 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 always a handy platform online to ask financial planning questions (hint: it’s us).
Once all that is done, don’t forget to cancel any automatic premium payment if you set up any standing instructions with the banks. That’s all we have for now – all the best.
fundMyLife is a platform that aims to empower Singaporeans to make financial decisions confidently. We also connect consumers to the right financial planners in a private and anonymous manner, based on their financial planning questions.
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