Endowment Insurance Basics

Endowment Insurance

• Pure Endowment: Sum insured payable only on maturity; in case of premature death, premiums refunded to next-of-kin with nominal interest.

• No Medical Examination Required: Generally does not require medical checks due to lack of protection element.

• Purpose: Primarily intended for savings, such as retirement planning.

• Endowment Insurance: Combines protection and savings; sum insured payable at end of fixed term, on reaching a certain age, or upon premature death.

• Component Types: Mix of term insurance (payout on premature death) and pure endowment (payout on survival).

• Premium Structure: Level premiums throughout the policy duration, similar to permanent whole life insurance.

• Faster Cash Value Build-Up: Growth occurs at a quicker rate compared to permanent whole life insurance, particularly over shorter policy periods.

• Guaranteed Cash Payments: Some policies provide cash payouts every 3 or 5 years; clients can withdraw or allow accumulation with interest until policy maturity.

• Higher Premiums for Cash Returns: These policies generally have higher premiums but offer periodic guaranteed financial support.

• Uses of Endowment Policies: Serve multiple financial goals including income protection, retirement funding, children’s education, business start-up capital, or luxurious retirement experiences.

Investment Linked Plans

• Concept: Offers opportunity to obtain life insurance while participating in investment funds for wealth accumulation and death coverage.

• Premium Splitting: Premiums are divided into protection funding and investment allocation for potential returns.

• Payment Options: Policy can be funded through single or periodic premium payments.

• Investment Management: Funds may be managed by the insurance company or external fund managers.

• Goal: Balance between providing protection and wealth accumulation through investment participation.

• Types of Investment-Linked Policies:

  • Single Premium Investment-Linked Whole Life Plan: One-time premium; provides life cover and units in the fund; typical life cover is around 125% of premium paid with a minimum amount of RM 5,000.00 in Malaysia.
  • Regular Premium Investment-Linked Whole Life Plan: Regular premium payments create units in investment funds; balances investment growth with life protection.
  • Investment-Linked Individual Pension Plan: Focuses on building a fund for retirement; funds can be converted into an annuity; no life cover included by default.
  • Investment-Linked Permanent Health Insurance: Covers health-related income such as disability; includes cash value and is often cheaper compared to traditional health insurance.
  • Investment-Linked Dread Disease Insurance: Provides full face amount upon diagnosis of critical illnesses like heart attack or stroke, ensuring financial support during severe health challenges.