If you are a person who are into fixed deposit offered by financial institutions or into those kind of single premium savings plan offered by insurance companies, I do have a question to ask you and that is
“Are you the kind who read your Benefit Illustration carefully especially on the Guaranteed and Projected Returns or just those who hear out from the Planner and make a purchase from there?”
The danger is here, if you are sold by the Planner based on the verbal recommendations that the plan is a Guaranteed one and in no way that it’s stated in the Proposal or Benefit Illustration. After you have signed it and at end of the term, the plan does not performed as what the Planner has stated, you will hold your own responsibilities and you have no one – even the Planner to blame for.
A Real Life Case Scenario Of Verbal Recommendation
I happen to come across this very simple couple who are having their Five Year Single Premium Endowment Plan maturing soon and would like to have a recommendation on a similar type of Plan as offered by my company.
They happened to see an advertisement in one of the roadshows that features a higher return as compared to the one that they had and would like a further clarification on it.
They were very happy with the maturity returns and with the plan that they once had. But upon seeing that advertisement from my company, they were tempted to make a comparison…
I shared with them that our Plan is similar to the plan that they once had. I printed out the benefit illustration, and explained that at the end of the term, they will have the Guaranteed Return, and the final value will be based between a projected return based on a 3.75% return of investment and another based on a 5.25% return of investment.
Then The Debate Of Discussion Started…
They were shocked to realize that my plan is not a guaranteed plan whereas theirs are. Then our discussions went further on to say that they want a Guaranteed Plan and seems like the other company is the only one offering that. They seemed disappointed…
I requested for further information as to what was the plan that they have bought and lucky enough, their plan is still being sold in the market so I can have a better understanding and position to explain.
Before showing them the wordings and such, they further shared that the Planner has told them that their Plan is a Five Years Guaranteed 2.6% per annum returns Endowment Plan and they have verbally confirmed with the Planner on it. Was that Guarantee being shown and written in the contract and Planner’s recommendation?
The answers from them were a mixed of “don’t know and no’s” and an attitude of not wanting to listen to me at all.
The Showdown Of The Truth Behind The Plan They Have Bought
I showed them the brochure of the plan they have bought and in it, the 2.6% return was in it and labeled with two words shocking to them – “Projected Return”.
I shared with them further that they were blessed that the other Company is able to fulfil and give them a return based on the projected return at the end of the term especially in times like the recent economic crisis.
Why Did The Planner Did What He Did?
I do not know the obvious reasons but there could be a few common possibilities like:
- The Sake of Commission. By saying that the deal is guaranteed, the Planner will close the deal much easier.
- It’s all Verbal and Not Documented. You will tend to lose memory of what is being said at that time. Therefore you can’t fault the Planner for the mis-advise unless everything is documented.
Things To Note When You Are Going For Any Single Premium Plan
- Go through the figures and have the Planner explained clearly to you whether the plan is guaranteed. If it is, you can ask the Planner to print another set of the Quotation and have it clearly stated. Anything that is documented will be easily justifiable in the future.
- Do ask for the available options like early termination, policy alteration or at worsened economic conditions. Ask what will happen to the Plan.
- There are really plans that are guaranteed but only to exist for a short moment. That means that the Plan is only being sold for a short period of time till the target is hit. We normally call this a tranche.
- There can be many other types of Single Premium Plans available like Investment-Linked or Endowment related, and if your Planner persists in promoting only one type, please ask why is it so? Better Commission or Sales Quota?
- Anything that you do not feel uncomfortable, please do not do up the plan straight away. Ask for better clarification.
I hope this will help you or even for your parents to understand better the features of a Single Premium Plan. Putting your money into such Plans are meant to make your money work harder and not against you. You have all the rights to know the mechanisms of the plan and your Planner must share what he really knows.