The Growing Appeal of Resale Insurance Policies in Singapore

In recent years, Singapore’s investment landscape has witnessed a rising interest in an unconventional asset class: second-hand insurance policies. Industry reports indicate that demand for these policies has surged by 20% since 2023, with approximately 80% of transactions involving endowment policies. This trend reflects investors’ increasing preference for secure, long-term financial instruments in response to economic volatility and inflationary pressures.

As traditional savings vehicles struggle to deliver attractive yields, second-hand insurance policies have emerged as a compelling alternative, offering both discounted entry points and predictable returns. This article delves into the key benefits, operational framework, associated risks, and prevailing market trends driving the popularity of these policies.

Key Advantages of Second-Hand Insurance Policies

1. Discounted Acquisition with Full Maturity Benefits

One of the most compelling advantages of purchasing a second-hand policy is the ability to acquire it at a significant discount while still receiving the full maturity payout. Buyers typically purchase these policies at a price 10% to 30% lower than their surrender value while assuming responsibility for the remaining premium payments.

For instance, a policy with a maturity benefit of S$100,000 and five years of remaining premium payments may be available for purchase at S$70,000. Upon maturity, the investor receives the full S$100,000, effectively locking in a low-risk return. This pricing inefficiency presents an opportunity for investors to optimize yields while minimizing exposure to market fluctuations.

2. Enhanced Liquidity for Policyholders

For individuals in need of immediate liquidity, selling a policy on the secondary market offers a more advantageous alternative than surrendering it directly to the insurance provider. Insurance companies typically offer a lower surrender value, whereas secondary market buyers are often willing to pay a premium—up to 30% higher than the surrender amount—ensuring a more favorable financial outcome for policyholders.

This feature is particularly beneficial for individuals facing unforeseen financial obligations, such as medical emergencies, debt repayment, or urgent personal expenses.

3. Stable, Predictable Returns with Contractual Guarantees

Unlike equities and other volatile asset classes, second-hand insurance policies provide stable and contractually guaranteed returns. The expected annualized returns typically range from 3.5% to 5%, making them a viable alternative to bonds, fixed deposits, and other conservative financial instruments.

Given their contractual nature, these policies eliminate the uncertainty associated with market-driven investments, offering a structured and predictable financial outcome.

4. Flexible Investment Horizons to Align with Financial Goals

Investors can select policies with varying remaining tenures to match their financial objectives:

Medium-Term Objectives: Policies with 5 to 10 years remaining can be utilized for education planning, milestone purchases, or debt clearance.

Long-Term Wealth Accumulation: Policies with 15 to 20+ years remaining provide a reliable vehicle for retirement planning or legacy-building strategies.

This flexibility enables investors to construct a diversified portfolio that balances risk, liquidity, and growth potential.

Operational Framework of the Secondary Insurance Market

The process of transacting second-hand insurance policies involves multiple stages and stakeholders:

• Policyholder Listing: Individuals seeking to liquidate their policies engage with licensed intermediaries specializing in secondary insurance transactions.
• Valuation and Pricing Assessment: The intermediary evaluates the policy’s remaining premium payments, surrender value, and projected maturity benefits to determine a competitive market price.
• Investor Acquisition: Buyers purchase the policy at an agreed discounted price, assuming responsibility for future premium obligations.
• Ownership Transfer and Beneficiary Adjustment: The policy’s legal ownership and beneficiary designations are transferred to the new investor while the original policyholder remains the insured party.
• Maturity or Claim Settlement: Upon policy maturity, the investor receives the full benefit, or in the event of a claim, the policy’s stipulated payout is disbursed accordingly.

Potential Risks and Considerations

1. Complexity of Policy Terms and Conditions

Certain policies contain intricate provisions, including bonus mechanisms, non-guaranteed returns, and exclusions. Investors must conduct comprehensive due diligence to understand all contractual obligations and payout structures before committing.

2. Limited Liquidity and Early Exit Constraints

Unlike publicly traded assets, second-hand insurance policies are not easily liquidated before maturity. Investors should be prepared for a long-term commitment and assess their ability to sustain premium payments throughout the policy tenure.

3. Regulatory Considerations and Due Diligence Requirements

The secondary insurance market in Singapore operates independently of the Monetary Authority of Singapore’s (MAS) direct regulatory oversight. This lack of formal regulation places the onus on investors to conduct comprehensive due diligence. It is crucial for buyers to verify the credentials of intermediaries, ensure that all transactional terms are transparent, and rigorously analyze the policy’s contract details. Unlike MAS-regulated financial instruments, which provide a layer of consumer protection, transactions in this market rely heavily on informed and prudent decision-making. Investors should also consider engaging qualified financial advisors to evaluate the risks and suitability of such investments in alignment with their financial objectives.

Market Trends Driving the Surge in Demand

Several macroeconomic factors contribute to the growing prominence of second-hand insurance policies as an investment asset:

• Post-Pandemic Cash Flow Needs: Many policyholders are selling policies to address urgent financial obligations arising from medical expenses, debt management, or lifestyle adjustments.
• Rising Interest Rate Environment: While bank fixed deposits currently offer rates of 3% to 4%, the contractual guarantees and enhanced return potential of second-hand insurance policies remain competitive.
• Low Policy Surrender Rates: According to MAS data, only 1% of policyholders surrender their policies annually, underscoring the scarcity and intrinsic value of these financial instruments.

Strategic Investment Considerations

Second-hand insurance policies present a unique investment opportunity by combining discounted acquisition costs, contractual security, and inflation-beating returns. However, achieving optimal outcomes requires a meticulous approach to research and risk assessment.

Key due diligence steps for investors:

• Assess the credit ratings of issuing insurance companies to mitigate counterparty risk.
• Engage with licensed intermediaries to ensure transparent fee structures and compliance with best practices.
• Seek financial advisory guidance to align policy selections with long-term wealth objectives.
• For sellers, the secondary market offers an avenue to unlock liquidity while minimizing surrender losses. For buyers, it represents a structured, low-risk mechanism to achieve predictable financial gains—provided thorough vetting processes are undertaken.

Before buying, investors should ask for detailed policy illustrations, consider possible risks like early termination or missed payments, and include these policies as part of a well-balanced investment plan. Since there are no formal regulations protecting these transactions, making well-informed decisions is the best way to manage risks. If you’re interested in investing in such policies, check out our available traded endowment policies for sale.