One of the first steps in financial planning, for someone entering the working world, is to buy an insurance policy that will also enable him or her to save and invest for the future.
With limited savings in the bank, insurance provides the financial security of a payout should anything unfortunate happen. Meanwhile, the investment portion of the policy can be deployed in ILP sub-funds ("fund") that aim for capital appreciation over the long term.
As children come into the picture, a second insurance policy with an investment component can be purchased to attain coverage along with a potential stream of income when the kids begin university. Insurance companies such as Manulife Singapore offer a selection of policies that can insure and invest for children from zero years old, helping parents give their children a head start towards achieving financial independence.
The benefits of embarking on an insurance cum investment plan at an early stage of your life include lower insurance premiums, since younger people typically face fewer risks in terms of their health. Policyholders can better benefit from dollar-cost averaging and ride out the impact of volatility in the financial market - buying more fund units during an economic downturn with the same premium amount, and increasing the potential returns over time.
But while most people understand the benefits of an investment-linked insurance policy, many would be concerned about committing to a regular premium investment plan at a time when much of the world is in the grip of a recession. In Singapore, for example, statistics show that retrenchments more than doubled to 8,130 in the second quarter of 20201.
How ManuInvest Duo can help
To address such concerns, Manulife Singapore has a policy called ManuInvest Duo which is designed to provide policyholders with the best of both worlds in terms of wealth accumulation and future-proofing their lifestyle.
The plan incorporates many features to support policyholders from their early working years to the time when they decide to slow down and eventually retire. Premiums start at $1,800 per annum for a ManuInvest Duo plan with a Minimum Investment Period (MIP) of 20 years, and policyholders can keep this policy in force and stay invested, even if they opt to stop paying premiums after the MIP.
Key features include:
- Partial withdrawal of up to 20 per cent of premiums paid (including top-up premium) in the previous policy year, starting from policy year six2, with a charge of $50 per transaction. This will provide policyholders with emergency funds in their time of need;
- Premium flexibility that allows policyholders to stop paying premiums for up to 48 months starting from policy year six to the end of the MIP. The temporary break will make it easier for policyholders to take a sabbatical without having to give up on the investment portfolio that they are building for the future;
- Sum insured of up to 100 times the first-year premium in the event of death, terminal illness, or total and permanent disability. The payment will help policyholders protect and provide for their loved ones.
In addition, policyholders can choose from a comprehensive suite of optional critical care riders to help them cope with illness.
On the investment front, ManuInvest Duo offers higher welcome bonus units to those who opt for higher coverage and a longer MIP, and loyalty bonus units awarded every year from policy year seven. These bonus units represent additional investments in the underlying fund, and will contribute towards the value of the policy when it matures.
David's story
To illustrate how ManuInvest Duo works, here is a scenario featuring David, who buys a ManuInvest Duo plan with an MIP of 20 years at the age of 36. David decides he will contribute $12,000 per year and chooses a protection amount that is 20 times his annual premium, or $240,000.
As David's account value increases with each premium contribution, and as the money he had put in previously generates potential returns, the premium amount allocated to insurance decreases and more money is set aside for investments.
Based on an illustrated annualised return of eight per cent per annum, a sum insured of $240,000 and the bonus units he will receive, David's account value will increase to $459,864.183 at the end of 20 years - after taking policy charges and fund management charges into consideration.
If David opts to stop paying premiums after the MIP, he will continue to be protected for death, terminal illness and total and permanent disability at the sum insured of $240,000 or his account value, whichever is higher.
As for the investments in his account, David can switch to an income fund that pays regular dividends as he nears retirement. ManuInvest Duo policyholders can switch funds without incurring charges to match their evolving needs over the life of the policy.
Policyholders can select a fund or a mix of funds based on their risk appetite, which will be reviewed periodically or when there is a major life event.
Securing your future
People need insurance because it is hard to anticipate what could happen tomorrow, let alone in the next 10 or 20 years. At the same time, a long term investment is what would cushion you from the ups and downs of the market, helping you to emerge closer to your financial goals.
The best time to buy an insurance cum investment plan is therefore today. To find out more about ManuInvest Duo, talk to a Manulife financial consultant who can advise you on the various options, or click here.
Terms and conditions apply. ManuInvest Duo is underwritten by Manulife (Singapore) Pte. Ltd. (Reg. No. 198002116D). This advertisement has not been reviewed by the Monetary Authority of Singapore. Buying a life insurance policy is a long-term commitment. There may be high costs involved if you terminate the policy early, and your policy's surrender value (if any) may be zero or less than the total premiums paid. We recommend that you seek advice from a Manulife Financial Consultant or its Appointed Distributors, or visit any DBS/POSB Branch, before making a commitment to purchase. Protected up to specified limits by SDIC.
1 The Straits Times, 14 Sept 2020. https://www.straitstimes.com/singapore/manpower/retrenchments-in-singap…
2 A policy year refers to the 12-month period that begins when a policy takes effect. If a person buys ManuInvest Duo on 1 Nov 2020, policy year 6 will be the 12-month period beginning 1 Nov 2025
3 The values in the above illustration are rounded off to the nearest dollar and based on illustrated investment rate of return of 8 per cent p.a., 4 per cent dividend payment, and 1.25 per cent fund management charge. Based on an illustrated investment rate of return of 4 per cent p.a. and 2 per cent dividend payment, and 1.25 per cent fund management charge, the account value at the end of policy year 20 is $294,418. All values in the above illustration are non-guaranteed and are subjected to the distributions and performance of the chosen ILP sub-funds
