Saturday, March 14, 2009

Low cash value on termination

Dear Sir,
I have a PRUCASH policy that started in 2002. The annual premium is $3934. The coverage is very low at $50,000 because it is meant to be an endowment plan. The annual cashback is $2500.

I've only recently educated myself through your website and other sources on how insurance and savings should really work and realised how big a mistake I made when I bought that policy.
The cash value now is about $16000, whereas my premiums paid to date is about $27000.
If I surrender my policy now, I'll "lose" around $9000.


What is my best course of action?Should I continue with the policy and take out the cashback yearly to invest in a low-cost ETF? Or should I terminate the policy and invest in an ETF with the entire sum? The difference in yields required for me to make up that $9000 loss seems to be quite huge.

REPLY
You should ask the insurance company to explain why you had to lose so much money, if you terminate it now. They owe an explanation to you.

To make a decision on whether to continue or terminate the policy, you should ask for additional information. Please read the relevant document in my website, www.tankinlian.com/faq

14 comments:

Anonymous said...

The Prucash is like the ntuc revosave a dubious anticipated endowment which pays yearly refund, your own money.It is stupid idea to pay for so long to earn a fxxxing 1+%. I think you should take your agent to task and to see whether you were mis-sold or misrepresented. I am sure if you had known all the details you won't even take a second look.
Look into the fact find form to see whether your agent mis-sold the product. Lodge a complain to the insurer if it was and demand a full refund and then to MAS against the agent.
No point continuing . It is guaranteed loss from the start.Imagine receiving your own money. Like one insurer says in the ad, money to save and spend. What it means is you give money to the insurer with one hand and receive your own money with your left but lesser than you give.This is a despecable product by a despicable insurance company and sold by a despicable greedy and dishonest insurance agent.

Anonymous said...

you should terminate and take losses. Don't waste time. Time could be used for investing in other instrument.
Don't touch any of the cashback anticipated endwoments you will be trapped like him. Hold faithfully only to be played out by the insurer with miserable return.

Anonymous said...

Actually MAS should look into this type of dubious products which do nothing for the buyers financially.
This is a scam product which preys on the unwary aunties and o0ld uncles. They only benefit the agents with high commission.
i was nearly trapped by a ntuc agent at their roadshow at bugis junction mrt with similar product. I discovered the 'revosave' has misrepresentation . The cashback is your money but it is misrepresented as 5% interest earned. It is risky. Does it not sound like the minibond?
It is neither a protection nor a saving plan. It is a money sucking plan that targets the suckers.
MAS msut clean up this type of products that deceive people.

Anonymous said...

Only dumb people buy this type of endowment.It was condemned . lately it made a comeback under some fanciful name like reverse-save .
Don't trust your agents. Some of you may have it. My advice is take losses NOW before you lose more.It is a guaranteed loss product.

Anonymous said...

I bought this type of policy few years ago. However, I didn't choose to cash out and the insurer is paying me about 3%p.a for the coupon. Is it worth keeping it?

Anonymous said...

3%? You MAY get it but unlikely and it is not guaranteed. It may be zero. Is there a table for it? Have you any idea what is invested in? From where do they give you? You should know anything, any rate above the fixed deposit rate involves some risk, some lock in.
You should ask the agent whether it is guaranteed or was it disclosed to you? There might be mis -selling.

Anonymous said...

If you are not financial-savvy, my advice is buy insurance for protection only. Full stop. It should be basic and cheap. There should be zero returns, except to claim the sum assured upon an insured event happening. I vouch that most agents 'misrepresent' when selling endownment policies by focussing on apparent high returns, which is uncertain. An endowment policy obtains its returns, hence cash value, from investments. The last 2 years were terrible, hence your cash value under water. I had an endowment policy from Prudential which gave good returns/cash values during 2004-2007, coinciding with bull markets. Last year, i switched the investible funds from equity to bonds, luckily for me, the funds depreciated 5%, compared to 40% decline in equity funds. Hence, the cash value still looks ok. If you have an endownment policy, you need to actively monitor/track its performance. This is no more the good times of steady stock market returns during the 1980s-1990s. We are definitely living in a new financial world order.

Everlearning said...

Is there a possibility for insurance companies to eradicate the column of non-guaranteed returns if they cannot honour the exact amount to the policyholders?

They should work out a more realistic figure for the policyholders who want to insure with them than after ten or more years later frustrate them with a low payout.

Recently, I was offered a number of policies that I fear to take up.
On maturity, the guaranteed sum is less than the total premiums paid. The non-guaranteed sum is half of the guranteed sum promised to the policyholder. That to me is non-realistic!

Obviously, insurance is no longer what it seems to be one or two decades ago!

Ghost said...

I diasagree. PRUCASH is actually a pretty solid policy from a very solid insurance company if you are in for the long term. It's up to you to decide.

SiaoCharBo said...

I myself also has PruCash policy and am on my way to terminate it once the maturity of 2 years is up as I see no point pumping more of my hard earned savings in it. Before I planned to terminate this policy, I actually asked if it is possible for the reduction of premiums since the first 2 years payout was quite huge but they only allowed increment of premiums but no decrease of premiums which I find it absurb. I would say, try to minimize your losses like I am doing now.

zhummmeng said...

To Ghost,
Prucash is good and solid for your pocket but it is scam to many. It is indeed a scam with a solid scammer behind.
To SiaoCharBo, you have done the wisest thing. Why continue to lose when the product is making you nuts?
You should look into whether your agent misrepresented the product to you .If there was mis-selling you should demand full refund of the premium or lodge with MAS against the agent for breaching section 27 and malpractice. It is your right. If you need help, approach CASE for help to write to the company. Remember to check your fact finding form for evidences. Don't accept all this and be at the mercy of the insurer and the salesemen. They are in cahoot to cheat you consumers by dumping and pushing rotten product to you.

northlander said...

Can i know if the total amount paid to premium can be return if my Prucash account is hold till maturity excluding the bonus? I remember the plan stated that every year cashback + 25% of the total invested amount to be paid upon death or sum assured+bonuses upon maturity.

Anonymous said...

I have signed up "PruFlexiCash (6th series)" in 25 April 2008 $100/mth. i have informed the agent that i am not interested to sign up for 20+yrs saving plan. I am looking for short term, utmost 10yrs. During 1st year i wanted to terminate the contract, however, i was informed by the agent to hold at least to the 2nd year, in order to get back what i have put in (upon 2years $2400). So i continuing paying, recently i have informed him that i would like to terminate the "PruFlexiCash" on the 2nd year of the contract.
He said that i have signed up for 25years plan, if i withdrawn now, i only receive $700. I went back checking my policy, indeed stated at "25" under term. He suggested me to continued the plan again for the 3rd year to enjoy some interest, and i ask him when will this break even, 20years later.

And i have signed up "PruLink Protection Account", at $200/mth. 50% to PruLink China-India Fund & 50% PruLink Singapore Managed Fund. I understand that for the 1st year, 80% of the money go to somewhere else and 20% was invested mthly to buy those units. From 2nd to 3rd year move to 50% to buy those units.

That time i know nothing about investment & insurance policy. I just wished to save up as much as possible, to enjoy a higher interest rate then the bank in 5 years time. Now i understand that through this policy is very hard to break even.
I am considering to terminate this policy. Should i?

As for PruFlexiCash, how should i go about it? $2400 was paid upon 2 yrs, and the agent claimed that i can received $700 only, when i terminate the contract.

Anonymous said...

my insurance agent told me for my 25 yr plan, i will break even after 20 yrs, then start to earn interest, if i terminate now, i will make a loss of about 1000.

the agent told me it's better than putting in the bank, as it has higher interest rate.

i put it in, cos i was not told about the long term(25yrs) and i did not know how to invest

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