Reply to Zaobao: Discounting of bonus

18 October 2006

Editor
Lianhe Zaobao

I refer to the letter, "Can NTUC Income's policy be more transparent?", by Madam Wei Qi Ying (Zaobao, Oct 13).

Mdm Wei purchased a Foundation Policy in 1988. This is a long-term endowment plan, with maturity in year 2042.

This policy pays the sum assured plus accumulated bonus on the maturity date, or on earlier death or permanent total disability of the life assured. This is a standard endowment policy which is bought by large numbers of people over the years.

The Foundation policy allows the policyholder to encash the bonus at its discounted value. The discounting factor takes into account the number of years to the maturity date. The effect of the discounting is shown clearly in the illustration given to the policyholder at the time of purchase.

The Foundation policy actually gives a special benefit to the policyholder. If the bonus is encashed for the purpose of the tertiary education of the life assured (child), we pay an additional 25% on top of the discounted value of the bonus.

If Mdm Wei compares the premiums that she has paid for the Foundation policy and the cash value today, she will realise that she is getting a reasonable return, compared to similar policies issued by other insurance companies.

I wish to encourage all policyholders to make the effort to understand the key terms of the contract at the time of purchase of the policy. The insurance company is required to provide this information in a standard illustration of benefits. It is the duty of the insurance adviser to explain the terms to you.

More information on NTUC Income's Foundation Policy can be obtained from our website, www.income.coop/insurance/foundation

Peh Chee Keong
Head, Life Insurance Dept
NTUC Income