When you see “life insurance,” it feels like a huge financial commitment with uncertain benefits.
Once you read the insurance’s terms, you feel much more confused if you’ll receive your benefits or get them at all during your lifetime. Insurance is tricky as an investment because you never know you need it until an insured event happens to you.
Read on to get the clearest picture of short-term endowment plans.
What Is An Endowment Plan?
Picture this: you want to insure yourself and your family against a low-risk but devastating event. However, nobody can predict the unlikely event’s passing, making insurance a troubling investment. If it passes, you can justify all you’ve paid for the insurance. Otherwise, you’ve spent a huge amount for nothing.
An endowment plan meets the investor halfway. You get protection against multiple insured events plus a maturity period that pays out a certain amount of cash benefit. Many Singaporean investors have made profits or broke even by using endowment plans, making them an excellent insurance and investment fund hybrid.
Types of Endowment Plans
Endowment plans have varying maturity periods carrying their respective risks. While short-term plans carry the relatively highest risk of all three, you can receive your money on the dot and with possibly insurer-guaranteed returns. On the other hand, long-term plans give your savings a longer time to grow, allowing insurers to give you better-guaranteed returns than short and mid-term endowments. Let’s dive deep into each one.
- Short-Term Endowment: You get various insurance on certain events, and your savings maturity period is often within 3-4 years.
- Mid-Term Endowment: You can insure multiple events, and your savings maturity period is often within 10-15 years.
- Long-Term Endowment: Customers can protect themselves against multiple insured events. Their savings maturity period is often within their near-retirement or retirement age (60-65).
Reasons Many Singaporeans Are Going for Short-term Endowment Plans
Now that you see the benefit of endowment plans, you surely have plans to use them to increase your nest eggs and give yourself protection. However, it pays to have a financial goal aside from just amassing wealth. For most Singaporeans, including yourself, a short-term endowment plan is perfect for the following:
- Education Fund: University education is becoming much more expensive every year. With a short-term endowment plan, you can grow your money enough to pay for a full-course.
- Retirement: Your life plan can pay you a hefty endowment upon retirement. Supplement it with short-term endowment plans.
- Forced Savings: If you’re bad at saving money, short-term endowment plans can do it for you and give you protective benefits too.
- Stable Investment With Enough Returns: Short-term endowment plans give you shorter maturity periods with guaranteed returns on your investment.
6 Best Short-term Endowment Plans in 2021
Without further ado, here are the best short-term endowment plans for wise investors.
1. DBS SavvyEndowment 4
DBS’s best for the short-term endowment industry has the bank partnered with Manulife as an insurance underwriter. If you’re a DBS account owner, it’s the perfect choice for your short-term endowment plan.
- Minimum payment: S $5,000 minimum premium payable using your DBS/POSB or SRS account
- Policy term: 3 Years with a 101% Death Benefit
- Maturity benefit: DBS Savvy Endowment 4 is a participating endowment plan with a split between guaranteed and non-guaranteed returns. Your capital can gain huge bonuses depending on the fund’s overall performance.
DBS SavvyEndowment 4 is currently a tranche available from DBS as of March 2021. You can conveniently enroll in DBS SavvyEndowment 4 using your DBS Digibank account.
2. Manulife Goal 7
The insurer has its own endowment plan aside from serving as DBS’s underwriter for its SavvyEndowment 4. The Manulife Goal 7 has a high minimum payment, but you enjoy advanced features you can’t find from other endowment plan providers in this list.
- Minimum payment: S $10,000 payable through cash or SRS.
- Policy term: 3 years for the fund to mature. Until then, you’re insured up to 101% of your premium.
- Maturity benefit: You get a guaranteed capital return from Manulife Goal 7 plus the fixed yearly income of 1.39% of your single premium. You can withdraw every year or leave to accumulate interest rates. Leaving it to accumulate until the maturity period gives you a total of 4.23% fixed yearly income plus your guaranteed capital.
3. LIC Secure Growth 2
The Life Insurance Corporation of Singapore (LIC) offers its own short-term endowment plan for Singaporeans. LIC Secure Growth 2 is their short-term endowment plan.
- Minimum payment: S $20,000 single premium up to S $150,000 single check or cashier’s order payment. Higher total payments guarantee higher returns.
- Policy term: 3 years with a death benefit of 101.12%-101.22% plus a 10% additional amount for accidental first-year total disability or death sufferers (which it calls the first-year accidental death benefit).
- Maturity benefit:
- You receive a guaranteed 1.12% per year for all single premiums from S $20,000-S $45,000
- Customers receive a guaranteed 1.22% per year for single premiums starting from S $50,000-S $150,000
4. LIC Wealth Plus 6
Another LIC endowment plan is guaranteed to give you the best returns. Its main difference to LIC Secure Growth 2 is it extends the benefit maturity to five years.
- Minimum payment: S $20,000 single premium up to S $200,000 single check or cashier’s order payment. Higher total payments beyond S $50,000 guarantee higher returns.
- Policy term: Five years with a single-premium death benefit with a 1.20% or 1.25% simple interest rates added depending on your premium size.
- Maturity benefit:
- You receive a guaranteed 1.2% per year for all single premiums from S $20,000-S $45,000
- Customers receive a guaranteed 1.25% per year for single premiums starting from S $150,000- S$200,000
5. NTUC Income Gro Capital Ease
This endowment plan has the shortest policy term on this list at two years. It has many rewarding benefits for customers too.
- Minimum payment: S $5,000 payable through eNets or PayNow. You can pay through SRS, but the plan increases the minimum payment to S $20,000 using this method.
- Policy term: 2 years with death and total permanent disability benefits. If the insured event happens in the first year, you get a 100% premium. If it happens in the second year, you get 105% of the premium.
- Maturity benefit: Your endowment plan guarantees a 1.85% yearly interest rate (a total of 3.73%) added to your capital after the policy term ends as a non-participating plan.
6. Etiqa Tiq 3-Year Endowment Plan
While it has one of the highest minimum payments for an endowment plan, the Etiqa Tiq 3-Year Endowment Plan has a short policy term of 3 years plus a great death benefit.
- Minimum payment: S $10,000 single-premium payable by bank transfer or PayNow only
- Policy term: 3 years with a 101% premium death benefit
- Maturity benefit: Guaranteed returns of 1.8% per year.
Some Terms To Familiarize Yourself
The world of short-term endowment plans can get easily confusing. Here are some difficult terms that we can help you make sense of quickly with this handy glossary.
- Premium: The amount you pay to start the plan. Take note that all the payment amounts we’ve listed per product are only the minimum. You can pay more and get much higher guaranteed benefits.
- Policy term: The short-term endowment plan’s maturity period. Most plans can last for 10 years and beyond or up to your retirement age. Short-term endowment plans often have a 2-5-year maturity period.
- Capital or cash benefit guaranteed upon maturity: Most customers’ gripes about insurance pay for something they don’t believe they need. Some endowment plans give back their initial insurance payment.
- Maturity benefit: The amount your capital has grown throughout the policy term. It’s often expressed in percentages. Some maturity benefits are guaranteed and non-guaranteed.
- Insurance coverage: All insurance policies have a scope of insured events they can cover. For example, the LIC Secure Growth 2 gives you death and total permanent disability benefit. You won’t get these benefits during a car accident with minor injuries because it isn’t part of your insurance coverage.
- Tranches: Endowment plans are similar to savings bonds. They’re limited in number, and those with attractive rates get quickly filled. You’ll have to wait for the next tranche if the current one you prefer can’t provide for you.
Short Term Plans are Perfect for People Who Want:
- Stability: Insurance policies give you peace of mind regarding devastating insured events. Plus, you get a cash benefit after a certain period for investing money.
- Compulsory Savings Option With Benefits: Having a mandatory monthly savings deposit helps you have a rainy-day fund. Your insurance against certain events is a great money-saving bonus to have.
- An Investment With Guaranteed Life Protection: If you want to grow enough cash and wish you can preserve your investment and give it to your surviving family upon an insured event, short-term endowment plans are perfect for you.
Short-Term Endowments Might Be a Bad Idea For People Who:
- Don’t Need Insurance: You’re better off investing with growth and hedge funds rather than an endowment plan if you don’t want to pay for the insurance side of things.
- Want High Return on Investments: Endowment plans only offer humble returns. If you have a higher risk appetite, other specialized funds can work better for your financing goals.
- Have Financial Commitment Problems: While no fund will ever promise a get-rich-quick result, you’ll need to wait and be patient in receiving your returns. If you’re impatient, endowment plans and other investment products might not be for you.
- You Aren’t Confident You’ll Profit or Benefit: All investment products carry huge risk even with short-term endowment plans and other stable investments. If you aren’t confident or unwilling to take on any risk amount, it’s best to stay away from endowment plans.
Important Details To Always Consider
Before finalizing your endowment plan decision, make sure you’ve checked these decision-helping details. With knowledge about each detail, you can make the best financial decision easily.
- Guaranteed Returns: Check if the plan’s stability and low-risk profile fit your financial objectives. If you need insurance that gives back what you paid for if you don’t get to use it, check if your chosen plan returns your capital by the policy term-end.
- Non-Guaranteed Returns: Ask yourself how much do you prioritize non-guaranteed returns. While their rates are tempting, the extra cost and expectation have a higher risk than guaranteed returns.
- Insurance Coverage: Death and total disability benefits are helpful, but you have to make sure you fit the criteria when the insured event happens.
- Endowment Duration: Short-term endowment plans offer 2-4 years of premium payment while giving you substantial returns. However, you might want a higher return on your investment and are willing to wait a little more for it.
- Early Redemption: Some short-term endowment plans allow you to choose the maturity benefit with some penalties. Make sure to ask these directly from your endowment plan provider.
Always Have a Birds-Eye-View on Things
Short-term endowment plans are an extremely-low risk product with an in-depth focus on insurance plus a small profit on the side. They’re great for customers who want an insurance policy but get back their investment capital if they never had to use the product.
It’s great to sign up for a short-term endowment plan if its insurance coverage works for you. Plus, it’s a perfect plan if you’re not willing to wait 10 years or even up to your retirement age. Always remember, the best endowment plan is what works well for your needs. Make sure to list your needs to see whether all currently available tranches work best for you, such as items in our list.
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