The statistics says it all

The Life Insurance Association (LIA) has released the performance figures for the life insurance industry for the year 2008. I’ll just zoom into 2 points in the report which I find disturbing.

Claims Payout

A total of $5.12 billion was paid out, out of which only $359 million was for death, critical illness or disability claims. The remaining $4.76 billion was for policies that matured. Hmmm… policies that matured?

Normal Term plans have no maturity value.
Some Whole LIfe plans mature at age 99/100.
Investment-Linked-Policies (ILP) mature at age 99/100.
Endowment plans have a maturity value after a fixed term.

So are the $4.76 billion, or 93%, of maturity benefits coming from endowment plans? Attempts to verify the figures with those on MAS website has prove futile. 1 reason could be due to the different classifications of data. There don’t seem to be a common way of classification.

From my own experience, I would not be surprised with the kind of skewed payouts in favor of endowment plans. It is a common sight to see people having many endowment plans but little protection. Endowment plans have a place in one’s financial plans, but it’s definitely not for protection. However, the common sales pitch is to sell endowments as protection cum savings. The though of receiving a sum of money on the plan’s maturity is appealing to many. But compared to a Whole Life or Term plan, endowment plan’s  coverage is much lower.

Average Sum Insured

The average sum insured is just $36,386 for single premium and $36, 650 for regular premium. The low coverage for single premium is not too much of a concern in terms of protection planning as it is most likely endowment or maybe annuity plans. However, for regular premiums, a figure of $36,650 is simply too low.  This just illustrates the common problem of paying too much and covering too little.

Remember to seek coverage before looking for saving plans.

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