In today’s modern, fast-paced world, where almost everything appears to have a price tag, it’s not surprising that even your endowment insurance policy has transformed into a tradable commodity. For many Singaporeans who once held high hopes for their endowment policies but later found themselves grappling with regret, a beacon of hope now shines on the horizon.
Instead of resigning themselves to simply surrendering their endowment insurance policies, individuals now possess the empowering option to sell them to either eager individuals or companies looking to acquire such policies.
As highlighted in a comprehensive 2020 report by the Monetary Authority of Singapore (MAS), the total value of new endowment policies sold in Singapore in 2019 reached an impressive S$17.5 billion. This significant figure underscores the magnitude of the market for endowment policies, making it a noteworthy financial arena.
Furthermore, a recent 2021 report published by the Singapore Life Insurance Association (SLIA) revealed that one in every five Singaporeans currently holds an endowment policy. This statistic paints a picture of a substantial pool of potential sellers within the endowment policy market, underlining the relevance and importance of exploring the option to sell these policies.
The notion of selling an insurance policy may be unfamiliar terrain for many, but it represents a crucial lifeline for those who find themselves entangled in a web of financial choices. In the following essay, we embark on a journey to delve into the motivations and processes behind why an increasing number of Singaporeans are opting to sell their endowment insurance policies instead of surrendering them, seeking to shed light on this consequential decision.
The Path to Selling an Insurance Policy
Enterprises like CapitaSafe have carved a niche in the resale of insurance policies. They serve as intermediaries between policyholders and potential buyers, offering a fair valuation of the policy’s worth. Typically, they provide a payout that can amount to as much as 10 percent of the Surrender Value (SV) offered by the original insurer.
Consider this scenario: you possess an endowment insurance policy set to mature in a decade, but you find yourself wanting to sever ties with it after a mere three years. Surrendering the policy at this juncture would yield an SV of $5,000. However, the total premiums disbursed over three years might surpass $8,000, resulting in a substantial financial setback. Alternatively, by opting to sell the policy, you could potentially receive $5,500. This transaction would transfer both the policy and its future payouts to the purchasing entity, allowing you to mitigate your losses.
Criteria for Selling Your Policy
Several prerequisites must be met when contemplating the sale of an insurance policy:
- The policy in question must be an endowment policy, one that culminates in a substantial payout after 10 or 15 years.
- Payments towards the policy must have been made using cash, excluding Central Provident Fund (CPF) contributions.
- The policy must originate from a recognized insurer, typically any Singapore-based insurer.
- The terms and conditions of the policy must align with the preferences of the prospective buyer, who may have specific criteria, such as desired maturity duration or minimum return rates.
Navigating the Legal Landscape
It’s important to acknowledge that while selling endowment policies is legally permissible, the resale market for such policies remains unregulated by the Monetary Authority of Singapore (MAS). An exception arises when the buyer or intermediary involved is already registered under the Securities and Futures Act (SFA), thereby subjecting them to MAS regulations.
It’s reassuring to note that despite the absence of stringent regulations, instances of fraud within this market are remarkably rare. Transactions typically proceed smoothly, with the buyer issuing a cheque and the contractual terms being clearly defined.
Acknowledging the Limitations
It is crucial to comprehend that selling your endowment policy entails relinquishing ownership to the purchasing entity, effectively forfeiting your rights to future payouts. This includes any supplementary features that may have accompanied the policy, such as riders for personal accident insurance.
Who Should Consider Selling Their Endowment Policy?
Various circumstances may render selling an endowment policy an appealing option:
- Financial Hardship: If your financial situation takes a downturn and prospects for recovery seem bleak, selling the policy can provide much-needed financial relief.
- High-Interest Debts: Selling the policy early can serve as a means to tackle high-interest debts, like credit card balances, which often accrue interest at rates surpassing what your policy can generate.
- Seizing Investment Opportunities: If you stumble upon a more promising investment offering higher returns, selling your policy can provide the capital required to seize this opportunity.
- Reaching the Break-Even Point: When the total premiums paid come close to matching the eventual payout, cashing out may emerge as a more financially advantageous choice compared to persisting with premium payments.
- Shift in Life Expectancy: If your health deteriorates and you possess a long-term policy, selling it might emerge as a practical decision, although insurers often incorporate provisions for such situations.
The Role of Insurance Agents
Insurance agents have a pivotal role to play in this context. They ought to consider informing policyholders that selling their endowment policies is a viable alternative worth exploring. In some instances, the slight reduction in profit from selling the policy may be outweighed by the benefits, especially if the policyholder intends to transition to a different policy offered by the same agent.
Interestingly, it’s worth noting that there is generally no obligatory requirement for policyholders to inform their agents when selling their policies. This provides flexibility for policyholders to make informed decisions aligned with their individual circumstances.
The choice to sell an endowment insurance policy in Singapore is gaining momentum as policyholders seek to optimize their financial positions. This alternative empowers individuals to recoup some of the value tied up in policies they may no longer wish to uphold. Nonetheless, it’s imperative to consider one’s unique financial circumstances, objectives, and the terms of their policies before embarking on this transformative decision. Ultimately, whether to sell or surrender an endowment policy should be a choice that serves the best interests of the policyholder.
We understand that life circumstances can change unexpectedly, and sometimes it becomes necessary to reevaluate financial decisions. If you, or someone close to you, is currently considering surrendering a life insurance policy, we want you to know that we are here to help. We empathize with the challenges life can throw at us and believe in providing better solutions for our clients. Surrendering a life insurance policy can be a significant decision, and we are committed to assisting you in making the best choice for your unique situation.
Our team of experts is dedicated to finding a more profitable solution than what your insurer might offer. We’ll take the time to understand your specific needs, financial goals, and circumstances to tailor a solution that suits you best. Please don’t hesitate to reach out to us. Your financial well-being is our top priority, and we are here to support you every step of the way.
Disclaimer
Every effort has been made to ensure the accuracy of the information provided, but no liability will be accepted for any loss or inconvenience caused by errors or omissions. The information and opinions presented are offered in good faith and based on sources considered reliable; however, no guarantees are made regarding their accuracy, completeness, or correctness. The author and publisher bear no responsibility for any losses or expenses arising from investment decisions made by the reader.
