Tips to Choosing an Endowment Plan in Singapore


An endowment plan is essentially a life insurance policy with a savings component. A policy holder will save regularly over a period of time, and upon maturity receive a lump sum amount. This amount is usually timed to fund various financial needs at important junctures of one?s family life.

An endowment plan satisfies the needs for life coverage and savings in a single policy. In fact, endowment plans typically earn higher interest rates than a savings account with a bank. Commonly referred to as a savings plan, these plans help to save for important life events like funding a child?s university education or retirement.

Pick a suitable time frame for your endowment plan

Endowment plans come in different time frames. Typically, you can buy plans with tenures ranging from 10 to 25 years. Knowing when you would require the money would ensure that you purchase the appropriate plan with the appropriate time frame. For example, if you were saving for a child?s university education, you should purchase a plan which would mature just before your child enters the university. But if you are saving for your retirement, and you are say in your mid thirties, then you may want to pick a plan that matures just before your desired retirement age.

Pick a reasonable premium amount

A plan only works if you follow through with it all the way. Many insurance policies lapse because the policy holders do not service their premiums diligently. Committing to the right amount of premium would ensure that you do not over commit. Having a lapsed policy does not benefit the policy holder. Factor in the fact that there may be times when you are in-between jobs or have added financial commitments out of the blue. Ensure that you have the financial means to continue the premiums when you do not have a steady income.

Understanding the differences between plans

A traditional endowment plan accumulates cash value based on the rate of return of the underlying fund which the insurance company places your premium in. This is the usual plan most customers pick when they want a hassle-free plan. However, there are investment-linked endowment plans. These plans allow the policy holder to pick the underlying fund to place premiums in. The policy holder can decide on his risk appetite while choosing which funds to invest in. If you are savvy when it comes to investing, this is most likely the option you would pick.

Pick a suitable financial planner

Most endowment plans between competing insurance companies are the same. Yet there is one important component when it comes to picking an endowment plan ? a good financial planner. A good one will advise you on ways to achieve your finanical aspirations. He will also advise you on the suitability of an endowment plan. A good financial planner is also an honest financial planner will understand that his client has a limited budget, and will plan an endowment plan to suit his unique financial situation. Finally, a good financial planner should be responsive to your queries. Look for someone who is serious about the business. Perhaps someone with many years of experience under his or her belt.

An endowment plan is simply a forced saving plan with an insurance component. Having a well-covered endowment plan that takes into consideration all your financial concerns and goals is a big step towards achieving financial mastery.

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