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TODAY MONDAY 28 OCTOBER 2013

EVERYONE CAN BE FINANCIALLY SAVVY

A two-in-one financial solution

Endowment plans provide the convenience of savings and protection in one policy
ENDOWMENT PLANS EXPLAINED
Dual role Meet your savings goals while protecting your savings at the same time. These are mainly used to meet a specic nancial goal, like saving for retirement. Set duration These usually mature after a xed period of say, 10 or 20 years. Align the savings duration so that you dont need these funds to grow your savings. Non-par policies pay the sum assured upon death or total and permanent disability of the insured. Policy holders dont receive dividends as they dont participate in the prots the insurance company earns. Par policies offer a mix of guaranteed (the sum assured) and non-guaranteed benets (bonuses or cash dividends, depending on the prots made by the fund). Other factors to consider Savings tenure and affordability.

Two weeks ago, we looked at how you could take charge of your nances by drawing up a plan to build up your regular savings. This week, well show you how you can protect those savings. Whether its buying a new home or saving for retirement, crafting a financial plan is important to meet your nancial goals. But even the most detailed planning can be derailed by unforeseen circumstances that affect your ability to earn an income. One product you can consider to help full some of your nancial goals is an endowment plan.
WHAT ENDOWMENT PLANS DO

5 years

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An endowment policy allows you to accumulate savings and helps to protect your family from lifes uncertainties.
ONG ZE TENG

An endowment policy allows you to accumulate savings and can help to protect your family from unfortunate events like death or disability. Such plans are mainly used to meet a specic nancial goal, whether to pay for a childs tertiary education or to build up a specic level of savings for retirement. These policies mature after a xed period of time, usually set at 10, 15 or 20 years. If you want to have more comprehensive protection, you can consider protection riders which help safeguard your savings. Riders offer coverage in the event of unforeseen events including death, terminal illness, total and permanent

disability and major cancers. Some riders offer such coverage without the need for a medical checkup, while others require policyholders to undergo a medical examination but give larger lump sum payments.
PROTECT YOUR SAVINGS PLAN

policies that pay out a sum assured upon the death of the insured or if the insured becomes totally and permanently disabled during a xed policy period. Term plans have no cash value if the policy ends or is terminated prematurely since there is no investment element.
TYPES OF ENDOWMENT

If you already have an existing savings plan but do not have protection coverage, you may be leaving yourself and your loved ones vulnerable should anything unfortunate occur. Term insurance plans are one option to protect your existing savings. These plans are low-cost protection

Two common types of endowment plans are participating, or par, policies and non-participating, or nonpar policies. Par policies offer a mix of guaran-

An endowment policy allows you to accumulate savings and helps to protect your family from lifes uncertanties.

teed and non-guaranteed benets. Guaranteed benefits refer to the sum assured, which is paid when the policy matures or the insured person dies. The policy holder can also share in the prots made by the participating fund. This is paid through bonuses or cash dividends but are considered non-guaranteed benets. Non-par policy holders do not receive dividends because they do not participate in the prots the insurance company earns. Such policies usually provide holders with a xed return on the principal amount when the policy matures as well as protection upon death.

Protect your savings for added peace of mind

FROM POSB EXPERT BRANDON LAM Head of Consumer Investment and Insurance Products

WHY SHOULD I CONSIDER A PL AN THAT PROTECTS MY SAVINGS? IS A SAVINGS PLAN SUFFICIENT TO MEET MY NEEDS?

Savings will help you grow your cash reserves but wont be able to meet all your needs should something unfortunate happen, like if you suddenly fall ill and are unable to work due to certain health reasons. Endowment plans can help to meet your savings and protection needs and offer plenty of exibility. For i n s t a n c e , t h e y c a n b e stretched over a longer period, depending on your savings goals. They also offer guaranteed and non-guaranteed benets throughout the term of the policy with some choices on the

premium payment term. You also have the option of adding some insurance coverage that may not require you to undergo a medical check-up as well as cash benets which can go towards your retirement savings. If something unfortunate happens, the proceeds from these claims may still help you meet your savings goals or cope with unexpected expenses. Depending on your budget, you may choose to shorten your premium payment term, which would subsequently allow you to use your cash ow for other nancial goals.
I VE TAKEN STEPS TO START SAVING, IS THERE ANYTHING MORE I CAN DO?

Endowment plans can help you meet specic goals and protect your family from unfortunate events like death or disability. Term plans offer customers greater protection at a relatively low cost as compared to a whole-of-life plan. You pay a xed premium every year for the duration of your period of coverage. You might want to consider a plan that offers coverage for at least 10 times your individual income until your children are financially independent. This offers a good balance between affordability and financial protection.
WHAT OTHER FACTORS SHOULD I CONSIDER?

1. Your health and age. These play a part in determining your premiums. All other things being equal, older customers usually pay higher premiums simply because they have a statistically greater chance of contracting a serious illness. 2. Your lifestyle. Smokers for example, pay higher premiums than non-smokers. 3. Starting your savings plan later means youll have to save more each month to reach your nancial goals. 4. If you already have existing coverage or a savings-with-protection plan, it is still advisable to revisit your overall protection needs with your nancial advisor.
This is the sixth stor y of a 19 -par t collaboration between TODAY and POSB.

If youre thinking about complementing or enhancing your savings plan, consider endowment and term plans.

Before deciding if you should invest in a savings plan with protection, you can consider factors such as: