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5 Unconventional Uses Of An Endowment Plan
An is a life insurance policy that offers a maturity benefit at the end of its term. You also receive insurance coverage in the event of an unfortunate event like death or permanent disability. However, the primary purpose of an endowment plan is usually not to provide insurance coverage. Buying an adequate amount of life insurance using an endowment plan could be prohibitively expensive. According to Foo Xiang Ying, Managing partner/ Fund Analyst at , “The concept of an endowment plan is not new. In fact, it closely resembles time deposits or fixed deposits as we know it where money (premiums) is accumulated over time till a specific date (maturity).” Many individuals opt for endowment plans as it is a form of “forced savings.” Insurance premiums need to be paid on a monthly, quarterly, or yearly basis. This compulsory payment instils a sense of discipline in the policyholder.Traditionally, these plans are seen as a good way to accumulate a lump sum at a certain future date. You could buy an endowment plan that has a maturity date that is less than ten years away, although many policies mature 15, 20, or even 30 years after they start. The idea is to time the maturity to coincide with the requirement for a large amount of money. Usually, policyholders use the funds that they receive to meet their expenses in their retirement years. Another common application of the maturity amount is to help pay for a child’s university education.But endowment plans can be used for non-traditional purposes as well. Here are five unconventional ways in which policyholders can benefit: Some endowment plans do not require medical underwriting“For people with medical issues and unable to get medical/life plan to protect their assets, they tend to rely heavily on endowment plan to quickly build up cash to prepare themselves during a medical emergency. In this scenario, they look for a guaranteed issuance endowment plan (no medical underwriting) that provides high returns and liquidity,” Mon Chao, founder of , explains. Yes, you can actually buy a life insurance policy that does not involve a medical examination. In most instances, this is merely a convenience. You don’t need to go through the hassle of undergoing a visit to the doctor.But it can be a great advantage for individuals who have a medical condition. In such a situation, insurers usually refuse to provide coverage that has a death benefit. These individuals can opt for an endowment plan that does not require a medical examination. You don’t need to provide exhaustive details about your medical history and nor do you need to go through a medical examination. Of course, the death benefit that is available under an endowment plan is relatively small. However, it could prove to be a significant advantage for someone with a medical condition. Your premiums could be waived in the event of a critical illnessCritical illness coverage is usually fairly expensive. But you can reduce this cost by buying a critical illness rider when you purchase your endowment plan.In the event of the occurrence of a critical illness, the policyholder’s remaining premiums will be waived. points out that this feature provides an additional advantage as well. If one of the purposes of purchasing insurance is to provide for a child’s education expenses in the event of the critical illness of a parent, an endowment plan can be a good solution. The critical illness rider is usually available at a low cost, allowing the policyholder to save on insurance premium. Denominate your endowment plan in US$Remember that your endowment plan is primarily a form of investment. By setting aside a sum every month or every year in the form of your insurance premium payment, you will be entitled to a lump sum upon the maturity of the plan. A good investment portfolio relies on diversification to provide steady and stable returns. It is not advisable to be over-reliant on a single asset class or to denominate all your investments in a single currency. By investing in an endowment plan, Singaporeans have the opportunity to diversify into a US dollar-denominated investment. This can be especially useful if plan to buy property in America at a later date. An endowment plan that pays a maturity amount in US dollars can also provide an advantage if you plan to use the maturity amount to pay for your child’s college education in America. Your endowment plan can work like a flexible CPF Retirement Sum SchemeThe provides CPF members with a steady stream of income in their retirement years. Your endowment plan can serve a similar purpose. explains, “Endowment plans can imitate the role of our CPF monies by introducing a fixed, disciplined way to save towards our retirement… it can function with regular monthly payouts exactly like the Retirement Account except without the Minimum Sum!” The income from your endowment plan can complement the money that you receive from the Retirement Sum Scheme. The enhanced amount at your disposal can help you to meet unexpected expenses and provide the means to a more comfortable retired life. An endowment plan can work like a trust fund for your childrenEvery parent is deeply concerned about the welfare of his or her children. But what if you meet with an unfortunate incident when your children are young? How will you ensure that they have the money that they require for their day-to-day needs and to complete their education? One option is to establish a trust. The trustees will follow your instructions and you can be sure that your children will have access to the funds that you have set aside for them. But there are two problems with this approach. Firstly, the minimum amount that you need to set up a trust is quite high. It could be in the region of about a million dollars. Establishing and maintaining a trust can also be expensive.An endowment plan offers a solution. It functions like an improvised trust fund and you can purchase a plan that meets your specific needs. Other rare unconventional uses notes that many individuals sign up for endowment plans in order to leverage on credit card cash backs. “When done properly, it is possible to earn interest on three different financial instruments on the same dollar saved,” he explains. Endowment plans on its own can be taken up to help maximise ones profits. recalls, “Many of my clients channel the dividend from their income fund into an endowment plan to grow it steadily over the years.” Tailor your endowment plan to suit your requirementsThere are a wide variety of endowment plans that are available in the market. You can choose the length of time for which you will need to pay insurance premiums. It is also possible to select the timeframe within which you want to receive your payouts. believes that there is no hard and fast rule of identifying an endowment plan that maximises the returns due to the vast variety of endowment plans available in the market. That being said, there are a few areas that he advises one should look into. “A few important factors to take note of when shopping for an endowment plan includes saving time horizon, effective yield, liquidity and participating fund performance. In terms of returns, all figures depicted on benefit illustrations are projected and hence, should not be used for comparison purposes. A financially savvy individual will focus more on the past performance of the participating fund, whether the insurer has cut bonuses during financial crisis and whatnot.” Don’t be in a hurry to make a choice. There are about in Singapore and between them, they offer dozens of different endowment plans. It shouldn’t be too difficult to find a plan that is right for you. This article first appeared on Yahoo Finance & ZUU Online - https://sg.finance.yahoo.com/news/5-unconventional-uses-endowment-plan-100000458.html https://zuuonline.sg/money/insurance/5-unconventional-uses-of-an-endowment-plan/
Do You Really Need To Buy Children Education Savings Plans?
Young parents in Singapore often worry about the costs associated with raising children. The amount that you spend on school fees and tuition classes can quickly add up. On top of this, you may need to pay for art or music classes, or for the other activities in which your child shows an interest. These expenses can prove to be a strain on the budget of every young family. But there is another aspect of your child’s upbringing that you need to consider. Every parent would like his or her child to attend university. However, tertiary education can be prohibitively expensive. How much should you expect to pay in university fees for your child? According to a recent CNBC Report, the annual tuition cost for a general arts and science degree in one of Singapore’s five major universities was between S$6,000 to S$7,000 in 2007. But this figure had jumped to S$8,000 to S$11,000 by 2016. Singapore Management University increased its tuition costs by 50% in 10 years. National University of Singapore raised the cost of a law degree by 103% in the 2007 to 2016 period. If the top universities have hiked fees by 50% or 100% in the last decade, it is entirely reasonable to expect additional increases in the future as well.This could be an important concern for the parents of young children. Will they be able to afford a university education for their child? Fortunately, there could be a simple solution to this problem. A child education savings plan can provide a disciplined way to save regularly every month. Over a period, you could accumulate a significant sum that could help you to pay a substantial part, or even the whole, of your child’s university education expenses.But what exactly is a children education savings plan and how does it work? Features of a child education savings planA child education savings plan is essentially an endowment policy offered by an insurance company. This policy would pay a lump sum after a specific period, usually ten, 15, or 20 years. So, what connection does an endowment plan have with your child’s university education? This is how it works:⇨ You would buy an endowment plan that has specific features that are specially designed to help you to defray your child’s tertiary education costs.⇨ The premium amount that you would pay would be a fixed monthly sum.⇨ You could pay a premium for a period that is shorter than the term of the policy. For example, you may have to pay a monthly amount for five, ten, or 15 years, for a policy that matures in 20 years. There are also options where the premium duration is for the entire term of the policy.⇨ At the end of the policy term, you would receive a maturity amount. Several child education policies pay the maturity amount in a staggered manner. So, for example, you could receive a lump sum at the beginning of your child’s first, second, third, and fourth years of university. When choosing a child education savings plan, there are several factors that you need to take into consideration. These include the lump sum amount that you want to receive and the manner in which you wish to get it and the number of years for which you are willing to pay the premium. Choosing a staggered payout may be a good idea, as it would help you to pay the yearly expenses that a university education requires. Benefits of starting earlyIt may be difficult to imagine your two-year-old going off to university. But you must plan well in advance if you want to maximise the benefit that a child education plan can offer. Let’s consider an example where you pay the insurance company a sum of S$400 every month for 20 years. That’s a total of S$96,000 (S$400 per month X 20 years X 12 months) paid over two decades. How much do you think that you will receive as a lump sum payout in 20 years? If we assume an interest rate of 3.5% on an annual basis, you will get S$138,302 at the end of 20 years.What if, instead of 20 years, your timeframe was ten years? How much would you have accumulated considering the same rate of interest and a similar monthly payment of S$400? Saving over a shorter period of ten years would give you a much small amount of only S$57,372. Is buying a children education savings plan always a good idea?In many situations, a children education savings plan can be the perfect solution for collecting the money that you will need for your child’s university education. The monthly premium amount will be deducted from your bank account on a regular basis, and the cash will be available when the university fees become due. But does this mean that everyone who has young children should opt for a child education savings plan?According to Loy Yi Zhuo, Founding Director at Chamberwealth, this type of plan may not be suitable for everyone.Loy explains, “These products usually have a very low death benefit and no critical illness benefits. Insurance companies keep these benefits at a minimum to lower the cost of the policy.” But what if there is an unfortunate incident and the breadwinner in the family is no longer able to work? A child education policy would be of little help as the payout on death or terminal illness under this plan would be very small. Although the payout on death would differ between insurers, it could be as little as, say, five times the annual premium that you are paying. So, if your monthly premium were S$400, you would get a death benefit of less than S$25,000. That’s not a very large sum. Loy also points out that parents should look into the “… cash value of their existing policies. In fact, this cash value can be used partly to fund the child’s education ….”Finally, the return that a child education savings plan offers is usually not very high. There are better options available in the market. Buy a child education savings plan only if it meets your needsDon’t jump into buying a child education savings plan without first giving it a great deal of thought. After all, you are committing for a period of 15 or 20 years. The best approach is to conduct a thorough review of your existing savings and make an estimate of the funds that you already have. How much can this grow in two decades? You should discuss your plan with an experienced financial adviser. You may discover that you don’t need a child education policy at all. This article first appeared on MSN Money & ZUU Online - https://www.msn.com/en-sg/money/personalfinance/do-you-really-need-to-buy-children-education-savings-plans/ar-AAzeoka?li=AAaYtuN https://zuuonline.sg/money/insurance/do-you-really-need-to-buy-children-education-savings-plans/
Life Insurance vs Term Insurance. Which is Better?
For starters, you need to know the difference between a Life Insurance and a Term Insurance. “Both life and term plans are traditional insurance that provides similar coverage, but it’s usually for different purposes and life stages,” says Tan Kia Leng, Director of Sales (MDRT) at Chamberwealth.
The Digital Insurance Asia Annual Conference 2017
The Digital Insurer Asia Annual Conference 2017 is a one-day event hosted by The Digital Insurer. The purpose is to bring our community in Asia together to look at the future of insurance. Learn from the innovative strategies employed by experts in digital insurance. Hear the latest ideas, discuss the issues and meet like-minded enthusiasts for digital insurance. Event HighlightsTake a look at our for detailed information on our sessions and speakers.Highlights include: The opportunity to network with like-minded and passionate Digital Insurance Enthusiasts from across the industryFast paced and provoking panels, presentations and discussionsTechnology and insurance innovation showcasesActive attendee participation via Q&A sessions, polls & votingLive voting for our two Awards – The Asian Insurance Innovation Award and The Asian Startup InsurTech Award, with the finalists being announced on the dayThe Digital Insurer global updatesSession topics include all the key digital themes: The Digital Insurance Customer: what they want & how to reach themDigital Distribution: Ecosystems & Brand partnershipsLarge Company Innovation & Transformation: Incubating, accelerating & venturingScary stuff: cyber-security and data privacyTech Enablers: Latest on blockchain, AI & AnalyticsTDI Thought leaders: Digital Insurance around the world visit :
7 Top Considerations in Will Making
Why make a will Experts say there is no better time to think about making a will than now, when you are able to. So do not commit the mistake of putting it off until it is too late.Mr Simon Tan, managing director of Attorneys Inc, suggests that having a will "regulates" your family's life after your death - what to do, how to do it and where to start looking, with regard to distribution of the estate. "With a proper will done, you can articulate all your wishes, which can run the gamut from what you wish to give to each of your loved ones, and whether they are to benefit from the gift immediately or over a period of time."You can explain the apportionment of your assets to each of them, whether as a measure or endorsement of your love for each of them or a reflection of your intention to cater for their special needs or nurture their nascent talents," he says.A proper will can articulate a person's wishes, such as what he wishes to give each of his loved ones, and whether they are to benefit from the gift immediately or over a period of time, says Mr Simon Tan, managing director of Attorneys Inc. PHOTO: AZIZ HUSSIN FOR THE SUNDAY TIMESMs Ang Kim Lan, director at Goodwins Law Corporation, warns that if there is no will, the Intestate Succession Act kicks in when it comes to distributing the deceased person's estate. "If the person is an orphan with no spouse, children, siblings, grandparents, uncles or aunts, his estate will go to the state," she says.Furthermore, the fixed rules in the Intestate Succession Act may not work well in some cases."For example, if a couple is newly married and, assuming that the husband is older than the wife, and if both die instantaneously during their honeymoon, the law deems the younger one to die last. In such a scenario, all the joint properties of the couple will go to the wife's parents, which may not be fair to the husband's parents," she says.A will lets you decide on appointing your executors, guardians for your children, whether you want to be buried or cremated, and who gets what and in what proportion, and so on.You can also make gifts to people outside your immediate family, such as your godson or your favourite charities, adds Ms Ang.A will is particularly important in cases where you need to set up testamentary trusts for children below 21 years old, special-needs beneficiaries and charities.Ms Ang Kim Lan, director at Goodwins Law Corporation, warns that if there is no will, the Intestate Succession Act kicks in when it comes to distributing the deceased person's estate and the fixed rules of the Act may not work well in some cases. PHOTO: AZIZ HUSSIN FOR THE SUNDAY TIMESIt will mean that there will no longer be any ambiguity and uncertainty as to how your estate is to be divided and by whom."The last thing you want is for people you do not trust or like to meddle in your financial affairs upon your death or even to benefit, just because the law gives them such an entitlement in the absence of a will," Mr Tan says.Top 7 considerations1. APPOINTING YOUR EXECUTOR(S) AND TRUSTEEExperts recommend that they should be people you trust. Mr Tan says that they would preferably be family members rather than professionals who would have to be paid for their services.Other factors to consider include appointing those who will potentially outlive you and who have the capability, ability and willingness to handle your affairs, personal matters and/or take care of the financial needs of your children.Ms Ang says it is prudent to have an executor who will be careful with financial matters.Mr Amolat Singh of Amolat & Partners says the executors of a will lodged by a business owner can step in straightaway, pending the grant of probate by the court."This is especially useful when the deceased has left a business or was a shareholder in a company. Under intestacy (in the absence of a will), all those entitled to apply for the Letters of Administration will have to agree on who should proceed to apply to court and, hence, they cannot step into the shoes of the deceased immediately," he adds.Mr Amolat Singh of Amolat & Partners says that without a will, no one may want to step forward or, conversely, many relatives would wrestle for the right, to care for young children. ST PHOTO: WONG KWAI CHOW2. APPOINTING YOUR CHILDREN'S GUARDIANSThose with young children can appoint guardians for their children so that there is no dispute between relatives on both sides as to who should care for them.Mr Singh said: "Not just young children but also for children with special needs. Without a will, no one may want to step forward or, conversely, so many relatives would wrestle for the right to care for the infants."These guardian(s) must be people you trust and who share the same values as you. Religion is also an important consideration, says Ms Ang.3. MAKING A LIST OF YOUR ASSETS AND WHERE THEY ARE LOCATEDMs Ang and Mr Tan say this is important as some of your assets may be located overseas or held by another person in trust for you."If you do not list them out carefully, they could well be ignored, mismanaged or squandered, or even lose their value if they depreciate over time. It is not necessary to list out the value of such assets as they may increase or reduce over time," says Mr Tan. 4. MAKE A LIST OF BENEFICIARIES AND YOUR GIFTS TO THEMUnlike the distribution of assets under intestacy, which is limited to family members, Mr Singh says you can opt to bequeath a gift to a charitable organisation, illegitimate children and friends.Gifts may be sums of money or personal effects like jewellery, cars, art items and so on. In fact, you can go beyond convention and choose to set up a scholarship, request annual prayer sessions or require someone to look after a pet dog, and so on.Lawyers have come across clients who would like to "rule from the grave". For example, one willed that he would give his property to the children only if certain conditions were met, such as obtaining a degree from Oxford or Cambridge, or marrying a woman/man of the same race/religion.Another stated that he would give an additional $300,000 to any of his five children if they continued with ancestral worship at their family home in Singapore.If you have dependants, think carefully if you are leaving anything to them under your will, says Ms Ang.If you are not leaving anything to them, it is prudent to provide a reason. For example, you may state in the will that you have already made enough provisions in your lifetime for them. This is because they may challenge the will by virtue of the Inheritance (Family Provision) Act - in the absence of an explanation in the will - which will not be desirable for you.Mr Tan says that when it comes to gifting beneficiaries, it is not a case of one size fits all.There may be a spouse, parent or child who is physically challenged, staying in a hospice or a home for the aged, or is mentally incapable of looking after himself or herself."You may wish to determine how much are his or her monthly needs and factor these expenses to be disbursed by the trustee every month from monies held in trust for this beneficiary with special needs."If there are minors who can inherit only when they reach the age of 21, or even later, if you so wish, their share of the estate will be held in trust for them by a trustee."It is important to curtail the right of a trustee to invest the funds held in trust for these beneficiaries as you may not want them squandered through poor investment strategies. The children's education and special needs should be clearly spelt out and discretion given to the trustee to disburse funds.5. INCLUDING A RESIDUARY CLAUSE Ms Ang says it is important to include a "residuary clause" in the will. This means that after the gifts of money or personal items, a "residuary clause" is included to give the balance to certain beneficiaries.For example, if you leave a named condominium to your son in your will but you later sell it and leave the sale proceeds in your bank account, the cash will not go to him in the absence of a residuary clause.If there is no residuary clause, any asset not dealt with in your will will be distributed according to the Intestate Succession Act."I always strongly advise clients to put in a residuary clause, says Ms Ang.Another reason is that you may acquire new assets subsequently along the way, which are not mentioned in the will."The residuary clause will take care of such new assets so that you need not keep changing your will every time you buy a new property or asset, she adds. Of costs and time The estimated time needed to obtain the grant of representation from the court will be longer in the absence of a will. Assuming it is a straightforward estate matter, the estimated time to obtain the Grant of Probate (where there is a will) is two to three months, compared with the four to five months to obtain the Letters of Administration, where there is no will, says Ms Ang Kim Lan of Goodwins Law Corporation. The time taken to distribute the estate depends on its size, efficiency of the exec- utors/administrators and whether there are child beneficiaries.IF THERE IS NO WILLThe family needs to choose the administrators and the court must approve them. If minors are involved, the family must choose at least two administrators. If there are minors or if the estate is huge, sureties (guarantors) must be appointed in case the administrators do not distribute as required by law.Legal costs start from about $3,500, in addition to disbursements, including court and commissioning fees, ranging from $800 to $1,500, says Ms Ang.IF THERE IS A WILLLegal costs start from $3,000, unless the matter is complex. There are dis- bursements as well, ranging from $800 to $1,200.6. MAKING THE WILL PERSONAL TO YOUMr Tan suggests expressing your love for the ones you are leaving behind by telling them of your wish and aspirations for them."Tell them how much you love them. Include an audio message or a video, pen a poem and leave behind some jewellery and heirloom for them to remember you by."Last but not least, it is important to state and identify confidential data, images and/or correspondence, including storage devices that you want destroyed.7. REVIEWING YOUR WILLExperts point out that marriages automatically revoke your will, unless it is stated that it was made in the knowledge of an impending marriage. However, a divorce or separation does not revoke it.Circumstances where a review is necessary are when a person mentioned in the will changes his/ her name, when the executor/ guardian/trustee has to change and when the beneficiary or asset list changes.Mr Singh points out: "The prudent rule is that you should review your will periodically and keep it updated to see if there is a need to rewrite it."Lorna Tan
Congratulation For Our July Top Unit
Congratulations to Wilson, our top unit for the month of July! Do the difficult things while they are easy and do the great things while they are small. A journey of a thousand miles must begin with a single step.