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Navigating endowment plans: Understanding what you buy is a must

Returns from endowment policies are subject to a number of factors, such as bonus rates and withdrawals, that would affect their maturity value and death benefit.

 Genevieve Cua

Genevieve Cua

Published Mon, Oct 24, 2022 · 05:50 AM
    • Illustrations for endowment plans make key assumptions for income and long term returns, which clients should ensure they understand.
    • Illustrations for endowment plans make key assumptions for income and long term returns, which clients should ensure they understand. PHOTO: PIXABAY

    RECENTLY, a news report in The Straits Times drew attention to the plight of a customer in her late 60s who bought an endowment plan at a bank. She discovered to her dismay that when she wanted to terminate the plan after three to four years, she would suffer losses of more than S$100,000, and the death benefit was not what she expected.

    As the case is expected to be arbitrated by the Financial Industry Disputes Resolution Centre (Fidrec), this column will not mention the product name nor the bank. The article raises the question of whether the client was “tricked” into an “unwise” investment decision, or suffered buyer’s remorse.

    It is also that the case reflects a misunderstanding on the part of the client. At point of sale for most life insurance, clients are presented with nearly 40 pages of documents, including the product illustration which alone may run to 25 to 30 pages. Clients are required to sign off that they understand what they are buying at point of sale. But do they really understand the product? Worse still, memories get clouded after some years, and this exacerbates any misunderstanding that may already be there in the first place.

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