If you are serious in planning for your children’s University Education with an Endowment Plan, do you know that beside the traditional or usual types of plans that ask you to:
- Pay For ‘X’ number of years for the same ‘X’ years of coverage term
- Pay For ‘X-5’ number of years for ‘X’ years of coverage term plus the option to withdraw a certain percentage of the Sum Assured for the last three years (meant as a form of using it to service the child’s first year followed by second to third year of university education)…
There’s another type of Limited Pay Endowment Plan that allows you to service like 5 years only and the plan continues to the end of the coverage term (and most importantly… the maturity return can be like 40% – 60% potentially higher than those plans mentioned above)?
If you are unaware and you are interested to know more, do continue to read on…
What You Need To Know About This Type of Limited Pay Endowment Plan
As mentioned, the main attractive feature of this type of Limited Pay Endowment Plan is that you need to service like 5 years of Premium Term and the plan continues to enjoy the insurance company’s annual bonuses till the end of the coverage term (usually in the range of 15 years and beyond)
The next attractive feature is that the returns can be potentially higher than most of the usual endowment plans, including those termed as Education Funding Plans. And this is despite the fact that the total premiums paid for this versus others are mostly the same!
How Can This Type Of Limited Pay Endowment Plan Get You Potentially Higher Return?
Simply put… this type of Limited Pay Endowment Plan ‘forces’ you to pay what you may need to pay in 15 – 20 years to this 5 years term.
And because of this ‘forced’ feature, you get to accumulate/save a bigger sum of money with the Insurance Company at the end of the fifth year that allow you to enjoy higher compounding return. Take this into consideration… which gets to earn higher compounding return (assuming same rate of return) – $10,000 at the end of the fifth year or $1,000 (and slowly increasing) at the end of the fifth year? Definitely, the first option!
But a common concern faced over such a plan is that if the parents commit to this plan, they have to pay a lot (sometimes beyond their financial means) and there’s a possibility that they may have to stop the plan if they should face with any Financial Issues… which is why the traditional type of endowment plans are widely taken up or recommended (despite that the return at the end of the maturity term is lower)…
So How Can One Overcome This Limitation And Go Ahead With This Type Of Plan
As mentioned in my other posts, buying insurance is not always a one-time affair. One should always plan according to what one can afford (means according to your budget and without affecting your daily lifestyle). If you like the kind of benefits you can get with this plan but you have a limited budget… just go ahead with what you can afford and get this plan started.
And if you know you can afford to save more (and more) the following years, you can always get another similar plan started and there are really no regulations that say you cannot do it (and have more than one such plans). If you really have to split the education planning to three or four plans in the following years – by all means do so!
Despite that you have to do it in this manner, do you know that by using this method, you can still be able to get a combined return that’s potentially higher if you have gone ahead with those traditional endowment plans?
Compare The Returns Of Such Plans Today
If you are planning for your children’s university education plans with your Financial Planner real soon, do check out whether the insurance company has such a similar plan and if they do, do ask for a comparison in terms of total premium paid versus the potential returns that you can get from different plans.
As you know, the cost of University Education is not cheap and since you are serious about planning for it so why not plan for it with one that can give you a potentially higher return. If budget is a concern, as mentioned, split up the planning into a few years and have your Financial Planner remind you each year to do a financial review for you and plan accordingly!