by joven222 » Tue Jun 17, 2008 05:39 pm
I have seen many types of life insurance in this community including those that I have not heard of before. But I think no one has talked about life endowment insurance. Are you also selling endowment insurance plans? What is much easier to sell? Endowment life insurance or a permanent life insurance? Endowment plans are insurance plans that pay lump some on a specific time of maturity. This can be a good way to save money. What do you think?
Posted: Tue Aug 05, 2008 04:02 pm Post Subject:
Thanks for the tips. I am planning to get an endowment plan after I have paid my other life insurance policy. I have only 1 year left. I will think about it if I would get an endowment plan or just a plain life insurance protection..
Posted: Wed Aug 06, 2008 03:08 am Post Subject:
What is much easier to sell? Endowment life insurance or a permanent life insurance?
Just a comment on this quote from the original post: it really shouldn't matter what is easier to sell! What matters is what fits the need best.
Joven, what need are you trying to fill with an endowment? As InsuranceInvestigator stated they are declining in popularity due to changes in legislation.
Posted: Sat Aug 23, 2008 04:53 pm Post Subject:
Hi Ontario Broker,
Thanks for reminding me.
it really shouldn't matter what is easier to sell! What matters is what fits the need best.
.Yeah, I guess I first need to qualify my need before getting a new policy. Thanks guys.
Posted: Tue Aug 26, 2008 05:26 am Post Subject:
Endowment insurance was popular in the past due to its substantial savings elements.
In addition to that, people back then (60s or 70s) did not have much knowledge about ways how to invest their money. Therefore endowment was attractive because of its return.
With the introduction of unit-linked products and more people become savvy about investment, endowment has lost its popularity.
Endowment insurance may still appeal to people who are conservative and careful with their money or who are not comfortable to place their money in stock market through the purchase of unit-linked products.
Essentially I am still of the opinion, protection comes first before investment or savings. From the financial planning point of view, we need to first address the needs of income protection only then we focus on wealth accumulation
Posted: Tue Aug 26, 2008 06:11 am Post Subject:
In addition to that, people back then (60s or 70s) did not have much knowledge about ways how to invest their money. Therefore endowment was attractive because of its return.
Add to this that there were not many options available for investments as well. The two most popular forms of insurance plans available that time were the traditional term life plans and the endowment plans.
Its true that against the term life plans, which doesn't offer any return other than the death benefits, endowment plans were a better options for the people. The returns too looked attractive because it was calculated on the then price index, and hasn't taken the inflation rate into consideration, which has exploded since then.
~jeremy
Posted: Tue Aug 26, 2008 07:01 am Post Subject:
Yeah, I guess I first need to qualify my need before getting a new policy. Thanks guys.
That's just the right approach.
I believe that the customer should always purchase a plan that suits his needs best. However, I've seen many to believe what other say and follow the trend. I guess, that's another reason why the endowments plans have lost their popularity.
Universal plans and equity indexed plans are now in trend. Most of the policy holders feel that they will be better off by purchasing what is current in the market and don't evaluate their needs much.
Universal plans are good for investment purpose, but it may not always be the right option for people who have their families' interest to preserve.
Thanks,
Rupert
Posted: Sat Nov 21, 2009 11:43 am Post Subject: NZKbKj
Hi! gntTQvtO
Posted: Mon Nov 30, 2009 08:20 pm Post Subject:
I agree completely with InsInvestigator. The Tax Reform Act of 1986, as amended, has, unintentionally, all but made endowments one of the most unfavorable uses of insurance through the creation of previously nonexitent "modified endowment contracts" (MECs).
But, even if that were not the case, endowments are the costliest form of individual cash value life insurance on the planet. Let me give you the example I use when teaching on the subject of cash value insurance and endowments in particular.
Imagine an inflated balloon. It represents the life insurance policy -- when the insured dies, the balloon bursts and the money inside rains down on the beneficiary. When a cash value policy is first started, it is only filled with air, which represents the insurance company's liability in a death claim. Over time, the air is replaced with cash value, so some of a death claim is still air, while the rest is the owner's cash value. At some point in time, if the insured has not died, the policy will mature or "endow" (used to be age 100, with the CSO 2001 mortality tables it is now age 120/121). The balloon contains no air, and it bursts, showering the money on the policyowner -- usually the face value of the policy, possibly more, sometimes less.
An "endowment" policy, by definition, matures much earlier than age 100, such as age 65 or 70, or in a stated period of time, such as 10, 20, 30 years, regardless of age. How can that be true? One must put pressure on the balloon to accumulate money at a faster rate (more $$ in premium). Because insurance contracts pay such low internal rates of return (3%-5%), there is not much time for compounding to work, and that puts added pressure on the balloon (even more $$ in premium).
When you shorten the time to accumulate (squeeze the balloon between your hands) and then put more pressure on the accumulation due to low return on savings (squeeze the balloon even harder), it forces the balloon to expand vertically (total premium payable), but it does not change the volume inside the balloon.
Now, we're also talking about a type of life insurance, the cost of which is directly influenced by age. Endowments are usually attractive to older persons who have less time available. So the cost of insurance itself will be higher to begin with.
Typically, an endowment can be 5-7 times more expensive than a whole life policy applied for at the same age. If you don't like the thought of paying $500 per year for a $100,000 policy from now to age 120, you definitely won't like one that costs $3000 per year from now to age 65.
Endowments are available from almost any company marketing cash value policies. They just aren't very popular in the face of the tax implications. The only true benefit is the death benefit payable to a beneficiary if the insured dies before the stated endowment age.
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