28 July 2014

Can Insurance Policies Return Better Than 4%?

It's always great to have a weekend extended by a public holiday. It gave me time to update the records of all my insurance policies and do a bit of a review.

These policies include whole life, endowment, investment and unit trust linked policies. The policies vary in terms of payment terms and involved cash, CPF-OA and CPF-SA.  You can see that I pretty much bought about anything in my foolish younger days.

I discovered that out of 11 policies from 3 different insurance companies, only one is projected to exceed a return that is greater than 4%. Even for that one case, it barely crossed the 4% threshold with a marginal difference. One might even say, "statistically insignificant". And it remains a projection with some way to go before 'maturity'.

It's pretty apparent that the whole foray has been one long and massive failure. Might as well have fed the money into CPF-SA.

Of course, part of the payments went to the insurance coverage and I have in some sense benefited. I'm most grateful that I'm alive of course. But considering the sub-4% performance, it still leaves a bitter taste.

In all fairness, I do have to say that the insurance policies were a good start for me nonetheless.  At least I had these to start off with to begin the journey to financial independence.  It was only past my fourth decade that I started seriously learning about investment and hence discovering the many alternatives that could generate better than the miserly 4% returns.

Onward to better returns!

p/s: Have you analysed yours?


Singapore Man of Leisure said...


Life insurance is great for building up an "instant" networth starting out.

In case something happens so our loves ones (dependents) are not left out in the cold.

I've cancelled my term insurance policy some years back, and will be cashing in my whole-life policy end of this year at it's 20th anniversary.

Whole-life policies break-even after 20 years.

The yield I got for the whole-life is around 3.75%? Not too bad lah, around CPF like returns.

I agree with you we should review our insurance needs from time to time.

When our net-worth is greater than our insurance payouts, then these life insurance policies have out-lived their usefulness ;)

Lizardo said...

Hi SMoL,

Thanks for sharing your experience. I'm about at the same stage and hence reviewing my insurance policies and considering my options as well.

Your yield of 3.75% is about similar to many of mine.

It's a happy problem when our net worth starts to outstrip the need for the insurance policies. I'm not quite there yet though.