Participating Savings Insurance (including Income Plans)

How it works

• Premiums go into the insurer’s participating fund, which the insurer invests and manages.
• Policy benefits have two parts: the guaranteed benefits written in the contract, plus non-guaranteed bonuses declared according to the participating fund’s performance.
• Common forms include savings plans that pay a lump sum at maturity, income plans that pay cash monthly or yearly for a period or for life, and legacy plans based on whole life insurance.
• Some policies allow payouts to be left in the policy to accumulate interest, or allow the policy owner or life insured to be changed under certain conditions for family legacy arrangements.

Key concepts

Concept	Meaning
Participating fund	A pool of assets kept by the insurer specifically for participating policies, invested in shares, bonds and other asset classes.
Bonuses	Including reversionary bonuses declared and added to the policy each year, and terminal bonuses paid on claim, surrender or maturity; all are non-guaranteed.
Single premium / regular premium	Paid in one lump sum, or in yearly instalments over a number of years.
Cash value / surrender value	The amount you can get back if you surrender at a given point; in the early years it is usually lower than the premiums paid.
Policy currency	Policies are available in SGD, USD and other currencies; non-local currencies carry exchange rate fluctuations.

Usually suitable for

• People with medium- to long-term money they will not need, who want some guaranteed benefits
• Families preparing for children’s education, retirement or legacy
• People who want a continuing cash flow in the future

Usually not suitable for

• Money that may be needed in the short term
• People who cannot accept losses from surrendering early
• People expecting large gains in the short term

Risks to note

• Bonuses are not guaranteed and are adjusted with the participating fund’s performance.
• Surrendering early may return less than the premiums paid.
• Foreign currency policies carry exchange rate risk.
• Money is committed for a long time, so liquidity should be planned in advance.

Questions to ask

• How large is the guaranteed part?
• When will the cash value reach the premiums paid?
• What bonuses have been declared in past years?
• Can the policy owner or life insured be changed, and under what conditions?