Thursday, February 15, 2007

Early withdrawal of Single Premium Endowment (Growth policy)

A policyholder asked if it is possible to make an early withdrawal under the single premium endowment (Growth policy) and get back the invested sum, with interest.

The Growth policy allows early withdrawal (ie surrender) but it will be based on the cash value.

During the early years, the cash value may be less than the invested sum, as the commision, charges and other expeses are deducted.

After 3 to 5 years, the cash value may be more than the invested sum, giving a modest return.

It is best to keep the Growth policy to its maturity date, to earn a fairly attractive return.

Usually, the charges for a single premium policy is much lower than a regular premium policy. This allows the Growth policy to reach a break even point at an earlier date, ie 3 to 5 years.

The Growth policy also provide some life insurance cover. In the event of death during the term, the total sum assured and accumulated bonus is paid immediately (without any discount). This will be much higher than the invested sum.
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1 comment:

Thomas Phua's Blog said...

Is there any particular reason why this person want to surrender the Growth Policy?

Some time it is difficult to decide to take an investment linked plan or traditional policy like this Growth Policy.

I have both.

Growth Policy has a guaranteed yield that give me peaceful sleep.

Investment linked plan offers better potential yield than traditional policy with some risk.

Some money can be in ILP and some in more secured traditional policy to maintain a balance, will give one better peace of mind.

My investment in the funds have been giving me better yield over the Growth Policy now.Much better infact.

But as I spread my money between such plans, it gives me peace of mind.

In my latter years, if the market turns down, my Growth Policy will give me the guaranteed yield with bonus while I await for market to turn around.

As Mr Tan said,"Risk is to your advantage".

I am managing this risk towards latter years with combination of risk and non risk instrument.

February 15, 2007 5:59 PM

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