Endowment Insurance Basics

Study Notes

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.

Description

This quiz covers the fundamentals of endowment insurance, focusing on the concepts of pure endowments and the unique aspects of payment upon maturity. Understand how these plans function, especially regarding their savings component for retirement and the lack of medical examination requirements. Test your knowledge on the differences between various endowment insurance types.