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POPS= Policy Owners Protection Scheme
PAR is the short form of participating.
This refers to insurance plans that participates into the bonuses declared by the insurance company due to the performance of the life funds. ie whole life plans and most endowment plans.
ReplyThanks for explaining.
Does it means POPS only cover all PARs up to maximum of $500k for all insured policies per insurer?
What about other non-PAR policies, are they covered by POP?
ReplyThe POPS covers both par and non par. Just that for most non-par policies, there won’t be a surrender value.
In any case, the ideal scenario is to let another insurer take over all the existing policies. That is why the regulations have been amended for that as well.
My guess is that POPS will come in after an insurer has defaulted and there are some claims coming in before the transfer (to a new insurer) has been completed.
Reply$100K cap for surrender value protection is not high, especially compared with the corresponding $500K cap for sum assured. The focus of POPS is to preserve the integrity of the protection aspect of insurance policies, not so much for the cash value or surrender value. This shows that even the authorities and “experts” involved are of the view that insurance should be for protection, and not for savings. I.E. Insure yourself as much as needed for as low & reasonable premium cost.
Anyway, I think this POPS will result in some increase in insurance premiums as companies pass on extra costs to customers. And some of the more investment-aggressive companies will throttle back on risk profiles to lower their POPS insurance costs, and may result in lower par fund performance and smaller bonuses. But of course less chance of the company imploding like AIG almost did. Again, this will further call into question the usefulness of par insurance policies as vehicles to meaningfully grow your long-term funds.
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