Child Education Whole Life Policy

When my child was barely one year old, we bought a Financial Whole Life with Cash Bonus insurance policy (Child Education Policy) from Great Eastern Life. This policy as the name suggests is to save a sum yearly and build up enough funds for my child’s education (in particular for her university education).

Since it is a whole life policy, it has the protection element which is the cover for death and total and permanent disability at an assured amount of $85,000. The Cash Bonus part of the policy is to provide cash benefits based on profits of Great Eastern Life through the years. This is the investment part of the policy.

Now that 21 years had passed and the policy is still in force, let us look at the returns on this policy.

Total premium paid to date: $21,783

Cash Bonus earned to date: $15,141
Cash Surrender Value (CRV) if policy is terminated now: $17,223

Based on the above numbers, the return is about 3.40% per year. This return is decent, even it is lower than Great Eastern Life’s projection when we first took up the policy. (Its CRV + Cash Bonus was projected to be $37,269 against actual $32,365.) One lesson learned is that projection of insurance policy at time of sale of policy tends towards optimistic level.

The Cash Surrender Value and Cash Bonus is more than the total tuition fees for a 4-year programme in a government-funded local university. This type of Child Education Policy suits my needs at this current time.

At the same time my child has death coverage on her life of $85,000. If the policy is not terminated, she can continue to own this policy and pay premium on her own to take over this policy. This beats buying a fresh Life insurance policy on her own at later stage in life, where premium may be higher.

Copyright © 2012, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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2 Responses to Child Education Whole Life Policy

  1. len says:

    Hi, i am not sure how you calculate 3.4% return for this insurance. i thought that the cash bonus and CRV are 2 different things. We do not get payout of these 2 components together at the same time. i thought they are triggered by different events. cash bonus is paid together with sum assurred upon death or TPD whereas CRV is what you get if you stop your policy.


    • limkimtong says:

      If I stop my policy now (or terminate by surrendering it), I will get back $32,365 (which includes cash benefits in the amount). This is based on confirmation by the insurance company. If you do not terminate your policy, you can only withdraw the cash benefits as per the particular policy terms. There is no surrender value to talk about in this instance. 3.4% an indicative return on terminating the policy now.

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