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Insurance for wealth management

ACCORDING to insurance experts, wealth management typically consists of three phases:

  • Accumulation of wealth
  • Growth and enhancement of wealth
  • Disbursement and distribution of wealth

The choice of insurance products available to manage these three phases would consist of endowment plans, investment-linked plans and annuities. Depending on one's life stage, plus factors such as time horizon, risk appetite and affordability, choice of products would differ.

Endowment is one of the most common insurance plans used to accumulate wealth for retirement income. It provides a systematic approach for regular savings or offers a lump sum option for one to accumulate guaranteed and non-guaranteed cash value. Payouts can be a lump sum at end of policy term or regular on a monthly or annual basis. Returns are stable and provide a good hedge against inflation.

Investment-linked plans would appeal to customers who wish to enjoy high flexibility, make decisions on choice of funds to invest in for potential upside from financial markets. One may either make a lump sum investment or regular investments to leverage from dollar cost averaging for long-term potential returns.

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Annuities are typically used for wealth distribution as it provides a steady stream of income for life upon retirement age. As the payouts cease only at the point of death, it provides a good hedge against longevity risk.

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