Had i not have the early financial education that i had now, I would most probably bought some of these from my adviser friends or the pretty advisers at bus interchanges.
The problem is that it might not be the form of "Protection" that they are touted to be. I have a colleague who asked me if this is a good plan.
Might as well take this opportunity to come up with a checklist to evaluate endowments for a person.
1. Evaluating your needs
What are your insurance objectives
Chances are if you are evaluating an endowment, you should have at least 1 adviser, if not more than one that have done some form of needs analysis with you. They might evaluate that you need some of the following (if not all, if the bloody ass scares you with all the doom case scenario) :
- Life Insurance (Term, Whole life or Limited Whole Life)
- Disability Income
- Personal Accident
- Hospital & Surgical
- Other General Insurance
In my previous article on my insurance philosophy, I have written extensively on some of these. Do take a look to get a better vantage.
Knowing clearly your plan is important so that you can evaluate and decide clearly. If you don’t you might be stabbing in the dark and that certainly isn’t a very nice way of evaluating something that will eventually set you back tens and thousands of dollars.
What you have already been covered
Endowments are essentially savings, but it is recommended that you take care of hedging the majority of your immediate needs before proceeding to endowment. Not spending any effort hedging for your dependents and against large hospital bills can be very detrimental. Your savings that you bought now will not save your dependents or yourself in some of these scenarios.
My advice is to choose the most cost effective plan to cover after evaluating the cost and benefits.
In most cases endowments might not be the most immediate needs. If you believe you have all these planned out, then we can move on.
What are you looking for in this plan?
Take some time to write down what the adviser said about why you need this plan. Or for the matter, why did you approach the adviser in the first place.
If it is for protection, then i am afraid this plan might not cover your needs. True, it might have protection against death and TPD, you will still need critical illness coverage. A life insurance might be more suitable for you then an endowment.
If it is for savings and protection, I still think a limited whole life or whole life is a better option when you compare the rate of return. (Note: I prefer term insurance and savings on my own)
If its purely for investments and savings then we can proceed to the next section.