Short term endowment plans are forever popular and their “tranches” are fully subscribed very quickly.
Again, tranches is a french word for a portion of something, usually of money.
This article is to give you the ultimate guide on these short term plans. You can use this as a referencing point for present and future offerings.
How these plans work is very simple.
1) Apply for the plan and make premium payments as soon as possible.
As the plans are popular, it is usually being offered on a first-come-first-serve, premiums paid basis.
2) Wait for the policy to mature, most plans lasts 2 to 5 years.
Sometimes a single tranche may have plans offered in two policy terms, for example, SingLife previously had a 3 year and a 5 year endowment plan in one offering. It’s natural that the longer period will come with slightly higher returns.
3) Upon maturity, the guaranteed returns with guaranteed capital will be returned to you.
Usually upon the last year, the capital will be guaranteed.
What to Look Out For
1) THE RETURNS
This goes without saying.
The returns of the plans are often affected by current interest rates in the market. AstuteParents will always benchmark the returns against prevailing fixed-deposit rates and SSB rates.
Another important thing to determine if it is simple interest or compound interest. This affects the eventual yield at maturity.
To this end, the easiest thing to do is to find the yield-to-maturity figure.
2) Policy Term
This is how long the policy will take to mature, and for the money to be returned to you. Naturally, the longer it is one should expect higher returns.
Not only that, this policy term should determine whether this product suits you or not. For instance, a 3 year plan is not a suitable savings instrument for a young couple that is saving for their house renovation that will be happening in 1 years time.
3) Funding Methods
Can the policy accept cash or is it also SRS-approved? Certain insurers allow re-investment of maturity proceeds of existing plans to fund these policies, NTUC Income’s Capital Plus is one such example.
4) Other Coverage Included
What is the death or total permanent disability coverage for this plan? SingLife allows withdrawal of the single premium without interest or penalty if life insured undergoes any life stage events (subject to various terms and conditions listed).
What Is Currently Available in the Market?
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