Thursday, June 17, 2010

Analysis of Asia Junior Life Policy (Part 2)

Previously, I wrote a short analysis on one of the whole life policies that I owned. It can be found over here. Today, I shall continue with my part 2 of the analysis.

In today's analysis, we will look at participating policies and bonuses.

BONUS ALLOCATION

Main feature of a participating policy is its ability to provide stable returns while participating in the performance of a Participating Fund or Par Fund. While one does not have any control over what the par fund is invested in, one can expect to participate in the performance through bonuses which are allocated to the policy holder.

Policy benefits or bonuses depend on the following factors:
1. Investment performance
2. Claims experience
3. Expenses
4. Decision of the Appointed Actuary and approval by Board of Directors

Usually, bonuses are allocated based on the surplus of the Par Fund. When bonuses are being considered, the actuary and directors take into account average performance of the par fund over a period which is longer than one year so as to minimise short term fluctuations in asset values of the par fund.

Hope this short posting explains how bonus allocation works for all you participating policy holders out there.

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