Want to sell or surrender your endowment policy?

When you don’t have a need for or can’t afford your endowment insurance policy anymore, you can either surrender it or sell it. Both options involve ending the policy, but they affect you differently.

If you choose to surrender your insurance policy, you will be ending it and getting the surrender value from the insurance company. The surrender value is what you’ll get if you end your policy before it matures. It is calculated based on the premiums you’ve paid and the investment returns earned by the insurer. If you surrender your policy, you will not have insurance coverage anymore or receive any future payouts.

Selling your insurance policy means transferring ownership of the policy to a third party buyer. The buyer will pay you a lump sum, which is typically higher than the surrender value but lower than the death benefit. The buyer will then become the owner of the policy and will be entitled to any future payouts. 

There are pros and cons to both options. Here are some factors to consider:

Surrendering your endowment policy to your insurer

Pros of surrendering your endowment insurance policy

1. You will receive the surrender value, which is guaranteed by the insurance company.
2. The process is straightforward and doesn’t involve finding a buyer.
3. You can use the surrender value for any purpose, such as paying off debts or investing in other assets.

Cons of surrendering your endowment insurance policy

1. You may incur a loss if the surrender value is lower than the premiums you have paid.
2. You will lose the insurance coverage and any future payouts.

Selling your endowment policy to a third party

Pros of selling your endowment insurance policy

1. You can receive a higher payout than the surrender value.
2. You can use the lump sum for any purpose, such as paying off debts or investing in other assets.
3. You can continue to benefit from the insurance coverage if you sell a portion of the policy.

Cons of selling your endowment insurance policy

1. The process can be complex and involve finding a reputable buyer.
2. The payout may be subject to taxes and fees.
3. You will lose the insurance coverage and any future payouts if you sell the entire policy.

Here are a few key things to consider when selling or surrendering a life insurance policy:

1. Understand your life insurance plan: Before deciding to sell your life insurance plan, make sure you understand the terms of your policy, including the maturity date, surrender value, and any penalties for early termination.
2. Determine the surrender value: The surrender value is the amount you will receive if you terminate the policy before the maturity date. To obtain this information, you can contact your insurer.
3. Consider potential loss: If you sell your life insurance plan before the maturity date, you may receive less than what you paid in premiums. This means you will incur a loss. You should consider whether this loss is worth it, especially if you have already paid a significant amount of premiums.
4. Look for a buyer: If you decide to sell your life insurance plan, you will need to find a buyer. In Singapore, there are companies that specialize in buying life insurance plans, so you can search online or ask for recommendations.
5. Compare offers: When you receive offers from potential buyers, remember to compare them carefully. Consider the price they are offering, any fees and commissions, and their reputation in the market.
6. Seek professional advice: Selling a life insurance plan can be a complex process, so it’s worth seeking professional advice from a financial advisor or lawyer specializing in this field.

Before you sell your endowment policy

Endowment policies are long-term savings plans that are designed to help individuals save money and build wealth over a period of time. These policies typically run for 10 to 25 years, and the proceeds are paid out at the end of the policy term or on the death of the policyholder.

If you are considering selling your endowment policy, here are some reasons why you should think twice before doing so:

1. Selling your endowment policy early could mean taking a financial hit. The payout you receive might be less than what the policy is worth. Here’s why: the policy’s value is tied to the investments made by the provider over the policy’s duration. If you sell before the term ends, the investments might not have reached their full potential, leading to a reduced payout.
2. Selling your endowment policy means saying goodbye to the guaranteed payout you’d get at the end of the term. Without this assurance, you’ll need to explore other options to ensure your financial stability down the line.
3. When you sell your endowment policy, you might face restricted choices for reinvesting the money. Since the sale price could be lower than what you’d expect to receive at the policy’s end, finding an investment with comparable returns might be challenging.

In summary, selling an endowment policy in Singapore is possible, but it’s important to understand the process and potential implications before making a decision. You should carefully consider the surrender value, potential loss, and seek professional advice before deciding whether to sell your policy.

If you didn’t already know, not all insurance policies can be sold. And selling a policy may not always be the best option. So, before you decide to sell your endowment policy, you should carefully consider your financial situation and seek professional advice.

Partnership with Financial Advisors

Although we do not recommend policyholders to surrender insurance plans, in cases where the client deems it necessary, it becomes the Financial Advisor’s duty to assist the client in obtaining the highest value for the policy.

Secondary markets for whole life policies and endowment policies have been established in various countries, including the United Kingdom, the United States, Australia, and Germany. For example, in the UK, the Financial Services Authority implemented the Traded Endowment Policies and Open Market Option Disclosure Requirements for 2002. This requires insurance companies to inform holders of insurance documents who are surrendering their plans that they have the option to sell their insurance documents in the secondary market, which may bring better value.