My wife took up an endowment policy back in 1992 and it will mature in 21 years time in 2013. This insurance policy was bought from The Insurance Corporation of Singapore Limited (now belongs to Aviva Ltd).
Back in 1992, an insurance representative produced a proposal of the endowment plan that projected the maturity amount with bonuses at the end of the policy. The projected return on the policy was about 7 per cent per annum.
She received the latest Bonus Statement from Aviva Ltd for 2011 recently and was disappointed with the total bonus declared to date and the projected maturity value based on 2011 bonus rate. Between the original proposal and this recent statement, the bonus shortfall comes to $9,800.
The return based on the latest bonus statement was mere 2.135 per cent per annum, way below 7 per cent per annum (suggested at the time of proposal). This 2.135 per cent return will just be enough to cover yearly inflation rates over the 20-year period. In terms of investment return, this is nothing to shout about.
From this incident, one can only say that insurance proposal with projected returns on insurance policy is too optimistic. It is one way to entice people to buy into the policy. As buyer of insurance products, take the projections of future bonuses with a pinch of salt. We cannot hold the insurance company to deliver the results for us.
Copyright © 2012, limkimtong for Living Investment
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