Tuesday, June 1, 2010

TM Asia Life Policy

I have an insurance policy with TM Asia. To be exact, it is a whole life policy with a plan name that is called Asia Life Plus. My parents bought it for me when I was 16 and I have been servicing it after I started working.

Recently, TM Asia declared that yearly bonus again for participating whole life policies and even though the returns on the par fund for 2009 wasn't fantastic, the bonuses declared were not reduced. TM Asia has never cut their bonus for the past 10 years. At least that is what I have heard.

After receiving the annual bonus statement, I decided to call the customer service centre for a benefit illustration of my policy. I just received the benefit illustration today.

Do note that since this policy was bought by my parents and handed over to me, I never did any comparisons with other companies then. While many people have never heard of TM Asia, it is actually quite a big company though it is relatively unheard of in Singapore. Its tied agency force is also very small as it tends to rely on IFAs to distribute its products.

A Quick Analysis

I am currently at Year 12 of my policy year meaning that I (and my parents) have paid 12 years of premiums worth a total of $22,204.80 for a coverage of $160,000 for Death and TPD. There is no critical illness coverage in this policy.

Based on the current surrender value, it is $11,200 (Guaranteed) and $4,357 (Non-Guaranteed). That adds up to a total of $15,557 in surrender value provided that the non-guaranteed component is accurate.

The bonuses become guaranteed additions to the sum assured once they are declared.

Terminal bonus on death and maturity

TM Asia whole life policy has the following feature:

Below 10 yrs : 0%
10 to 14 yrs : 25%
15 yrs: 50%
16 yrs: 100%
17 yrs: 150%
18 yrs: 200%
19 yrs : 250%
20 to 24 yrs: 300%
25 to 29 yrs : 400%
30 and above : 500%

This basically means that the non-guaranteed component for death or maturity of the policy starts to increase as the policy years go by. As my policy is only 12 years old, whatever bonuses that have been declared are still subject to 25% payout only. That means that if $10,000 in bonuses have been declared, the non-guranteed component payout is only $2,500. This bonus chart stated above relates only to claims during death and maturity (policy year 99 I am guessing). So I guess it is not really meaningful to me unless I die or I live past the age of 99.

Terminal bonus on Surrender

To add to the already confusing policy, there is another table that shows how the terminal bonus for surrendering the policy works out.

It states: "Terminal bonus on surrender as percentage of attaching bonus is illustrated from the end of 19th year onwards if applicable."

19 year: 125%
20 to 24 yr : 300%
25 to 29 yr: 400%
30 and above: 500%

Basically, at the 20th policy year ( meaning after 19 years of paying premiums), I can expect to see a big jump in the non-guaranteed component of the surrender value. This is illustrated in the benefit illustration where the non-guaranteed surrender value jumps from $8,464 to $20,858 during the 19th and 20th policy year respectively. At the 21st policy year, it almost doubles again to $42,057.

Conclusion

I have had thoughts of surrendering this policy but decided against it as I wanted to wait until the 20th policy year before making any decision. In any case, this policy serves as a good protection and savings plan for me. I know many people will recommend the proverbial Buy Term Invest the Rest mantra but this has worked well for me thus far. While it does not have Critical Illness coverage, I still have my coverage from other policies.

Many IFAs have also touted TM Asia's whole life policies as being one of the most competitive in the Singapore insurance industry. I am not sure how true that is. The only thing I know is that in terms of bonus declaration, TM Asia has been able to pay out a constant bonus over the past 10 years. Dollar for dollar and coverage wise, I would like to think that other companies might have even more competitive plans that provide better coverage at a lower premium. In fact, I think many of the whole life policies now are rather similar and competitively structured. Insurance companies often review their products so that they become better than their competitors.

4 comments:

  1. Hi FF,

    It is one of the best insurance companies out there, in my opinion. There is this limited whole life plan, where you get to multiple your sum assured by up to 2.5x, depending on the age you bought. This means that for the same premium you paid for say 100k sum assured, you can get a coverage of 250k.

    These days, the insurance plans are not longer just a whole life or term plan. The above said policy, i think, is a amalgamation of a term, whole and CI rider all rolled into one.

    Better seek someone trained to sieve out all the info, haha :)

    ReplyDelete
  2. Insurance plans are now getting quite complexed.

    It sounds pretty similar to another plan that is in the market currently.

    If I can have the benefit illustration of that policy you mentioned, I can sieve out the info.

    ReplyDelete
  3. Hi FF,

    I don't have it, so can't pass to you. I just heard about it. It's easy to get someone to pass you the benefit illustration. Just call up TM asia, I'm sure they'll be glad to give it to you :)

    ReplyDelete
  4. I've heard of a plan like the one la papillion mentioned being sold by GE. On a side note, it might be prudent to learn the different catrgorizations for a whole life policy's cash value. I.e. Reversionary Bonus, Coupons, Dividends.

    All these are subjected to different rules, regulations and interest rates and have different meanings in different companies. For example, coupons and dividends can be withdrawn without affecting the sum assured, but Reversionary Bonus can't.

    And some companies determine Terminal bonus as a percentage of Reversionary Bonus while others take the total policy value.

    Devil's in the details ;)

    ReplyDelete

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