DBS partnered AVIVA to promote the latter’s MyPlus Plan some five years back. I took it up during the second tranche offer period in April 2010. MyPlus plan is a 5-year single premium plan with fixed 2.25% annual payout along with added insurance coverage of death or accidental death.
Now that this insurance had matured after 5 years, I got back in full the premium paid at the start. The annual payout of 2.25% were received every year for 5 years. From 2010 to 2015, banks’ fixed deposit interest rates (12-month) were very low, between 0.29% to 0.51%. (Source: MAS) This plan beats the fixed deposits as regards to interest rate returns.
There are other considerations to look out for when going into this type of insurance plan.
- 5 years is long. Investment over this horizon entails risks. Interest rates may move up significantly over the period that will make this investment less desirable. We are looking at opportunity cost of investing something with higher interest rate.
- The underwriting company may get into financial difficulty over this kind of horizon resulting in less being received by way of liquidation.
- There are investment products that offer higher returns than 2.25% per annum, e.g equities and bonds. Money can be invested there.
- You must be willing to wait for 5 years to get back the full amount of initial premium. If the plan were terminated prematurely, you would get back lesser than the initial premium amount.
Now that I got back my lump sum premium on maturity, it was a relief. I can invest this sum in investment products with better liquidity.
Copyright © 2015, limkimtong for Living Investment
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