Endowment Polices (2)

Why buy endowment?

As what I mentioned in earlier blog, I shall not buy endowment plan for its return, because its return is as low as putting money at FD.  Furthermore, once committed, you have a long wait for maturity.  The waiting period is at least 20 years depending on the type of plan you have chosen.

Then, why endowment?

1. Endowment can be used to protect family wealth against spendthrift and immature beneficiaries.
e.g. A rich grandfather wants to show his love to his grandchild whom he may not live long enough to see till his tertiary education. Instead of leaving behind the money for the son to keep for the grandchild, Grandfather can pay a lump sum upfront to buy an endowment plan for his grandchild that gives yearly cash benefits.  This can be used as grandchild's school and tuition fee.  When the child is ready for his tertiary education at 20 years old, the policy will mature and thus let the child has a lump sum to continue his study.


2. To protect family assets from creditors and claimants.
When a person is declared bankruptcy, his creditors and claimants can claim from his bank account and other belonging. This is really heart broken when a middle aged person who has accumulated his wealth painstakingly suddenly facing the blow due to business failure.  What will happen to his children?  Do you know that money in the policy cannot be claimed by creditors and claimants?  Of course this is not restricted to endowment policies only.  However, if the policyowner is your child, they can use the money be it cash dividend, survival benefit or maturity value.

3.  Discipline saving habit
If you don't pay premium, your policy lapse.  Once lapse, you lose your earlier saving.  There are other better saving tools that give you better return in the long run and flexible enough to see you through difficult time.  However, this is good for those who want to force themselves to put aside saving or else be punished.