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Grow your wealth with insurance

SAFETY NET: The right insurance policy can help keep your financial plan on track, even in the event of unforeseen circumstances like impaired health or premature death.


    Aug 06, 2013

    Grow your wealth with insurance

    In this final instalment of a six-part series brought to you by Tokio Marine Life Insurance Singapore, we explore the concept of wealth enhancement, and tackle some frequently-asked questions about insurance

    Whether you need capital to start your own business or simply want to broaden your investments, insurance is a good way to grow your wealth.

    But purchasing a policy can be daunting, with many financial terms that can be confusing to the layman.

    My Paper speaks to Ms Yenlyn Leow, a financial-planning manager at Tokio Marine Life Insurance Singapore (TMLS), about how insurance can help in wealth accumulation, as well as some of the basics of insurance.

    What is wealth accumulation and what kind of policy is suitable for this?

    When we are younger, most of us do not have the capital to fulfil our financial dreams. We need a plan or system to help us accumulate that capital to, perhaps, start a new business or as seed money for further investments.

    Regular or limited premium participating endowment plans would be suitable for wealth accumulation.

    These endowment plans, which are designed with a focus on savings, encourage the disciplined and consistent setting aside of resources towards a financial goal.

    The maturity value paid out at the end of the policy term provides an accumulated sum of money to fulfil whatever objectives the client may have.

    Why should one consider taking out an insurance policy with wealth accumulation in mind?

    To build a nest egg, we need to have time and good health to earn sufficient income, and consistently set aside resources for the future.

    However, we may be exposed to uncertainties, such as premature death or impaired health, that may render us unable to continue to work towards our financial goals.

    The right insurance policy can keep our financial plans on track even under such circumstances.

    An insurance policy pays out the sum assured, an amount possibly equivalent to the financial target, even when such unforeseen circumstances occur, thereby still securing our financial goal.

    What is a participating policy?

    A participating policy is one that participates in the performance of a participating fund (par fund) in the form of bonuses. Such bonuses are not guaranteed. They are usually declared on an annual basis and may vary, depending on the performance of the par fund.

    How does a participating policy work and increase the policy's value?

    Briefly, here is how a participating policy works:

    Premiums collected from all participating policies are pooled in a par fund.

    The par fund invests in a range of assets, including fixed-income instruments, equities and cash, according to the insurer's investment strategy.

    Assets from the par fund are used to settle the expenses incurred in running the fund, as well as to make benefit payments to participating policyholders.

    At TMLS, on an annual basis, the appointed actuary will present a recommendation to the board of directors, who in turn deliberates and approves the bonuses to be distributed.

    Once determined, the bonuses will be added to the sum assured of participating policies.

    When such bonuses are added to the sum assured of participating policies, they become guaranteed. Over time, these bonuses accumulate and increase the benefit value of the policies, and are payable in accordance with the insured events specified in each participating plan.

    You can find out more about participating policies from

    What are some things to consider when choosing a policy for wealth accumulation?

    Clients may want to take a look at the track record of an insurer's par fund. Such information is available in the annual participating-fund update and in each participating plan's product summary.

    While past experience does not indicate future performance, such information gives one an idea of how strong a par fund is in making benefit payments to participating policyholders.


    For more information on the types of insurance available, speak to your preferred adviser or visit