Are insurance endowments losing their shine?

AT this time when interest rates are rising and lower-risk options become more attractive, I’m often asked how insurance endowment plans stack up.

Apart from its core role of protection, insurance is also favoured by many Singaporeans as a mode of savings and investment, particularly participating (par) plans. This is evident in Life Insurance Association’s latest data. In the first half of the year, par policies accounted for 44 per cent of new business of S$2.6 billion, compared to investment-linked policies (22 per cent) and non-par policies (34 per cent).

A number of insurers have told BT that they do not offer short-term endowments, at the moment, of less than 10 years in tenor. Have endowment plans become less competitive in today’s savings landscape? After all, it is possible today to secure 12-month fixed deposit (FD) rates of more than 2.5 per cent. The promotional rate of The Bank of East Asia for a minimum deposit of S$100,000 is 2.88 per cent for 12 months. The October issuance of the Singapore Savings Bond (SSB) – open for application this month – will return 2.75 per cent a year if held for 10 years.