Martin Lee @ Sg
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Misleading Insurance Bonus Statement

There was a letter by Tan Aik Meng in the ST Forum yesterday on how bonus statements by certain insurance companies are misleading.

Insurer’s bonus statement misleading

The gist of the letter is that the death value and cash values given in the policy statement are not the current ones, but of a value sometime in the distant future. This might lead to confusion.

Have a look at this example:

misleading bonus statement

Most people when they see this, might think that the death benefit is $172,500 and the surrender value is $98,500. They will not look further to find out the meaning of the * that appears.

Let’s take a look at what the * really means.

  • If you are below 45 years old, the illustrated values are based on the time that you turn 65.
  • If you are between 45-79, the illustrated values are based on the year 2034 (20 years) later.
  • If you are above 79, the illustrated values are based on the time that you turn 99.

I agree with the writer that the statement is misleading. If you die or surrender the policy today, the amount that you are going to receive is going to be significantly less than that so-called illustrated benefit/value.

To make matters worse, there is a word “current” that appears which really means the “current projected values”.

Instead of using “illustrated values”, I feel that the statement should use the word “projected values”. The insurance company should also include 1 more column for “current values”. 

Do you actually see your insurance statements, or do you usually chuck them aside? Are they clear in illustrating their current death benefit and surrender value unlike the example that I gave above?

Share your findings below by leaving a comment.

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8 comments
BC says 5 years ago

Only over the past 1 year, I have been trying to keep track of these insurance statements. I am coming to the conclusion that such statements dont add much value to better inform its clients and most times are confusing and misleading.
In my case, there is a endowment policy which I had stopped paying premiums years ago (ie paid up) but I am still being sent illustrated values projected on the assumption that premiums are being paid for the next 20yrs. How is that relevant when I am no longer paying any premium ?
I agree that Insurers should provide the Current Surrender Value and Current Death Benefit.

Reply
    Martin Lee says 5 years ago

    Dear BC,

    Are you referring to a Whole Life plan or an endowment plan?

    Reply
Jasmin says 5 years ago

More than 20yrs ago when I just stepped out to work, I bought a whole life 80k policy. That time 80k was still quite a lot of money and the annual premium was within my reach. Also, the agent told me many years down the line, the payout my beneficiaries would get would grow and surely more than 80k. I signed on the dotted line and am still paying it.
Whether my decision made that time was right or wrong, there is no way to undo it.
But I will never buy a whole life policy again.

Reply
xyz says 5 years ago

The bigger problem is the lousy value of this example “insurance”.
This is for a $50K wholelife insurance. What can $50K protect? Maybe just enough for 2 years of living for your remaining spouse & children if they live like foreign workers.
As a savings vehicle, it also fails, having severe limitations and high liabilities.
For the same price that this person is paying for this $50K wholelife, he should get a term insurance of a few hundred thousands that can cover his dependents when they need him most.

Reply
James says 5 years ago

My Mom has the GE Whole-Life policy and the bonus statement was exactly similar to the one you posted. I was surprised why the surrender value was so high, until I saw that it was a projected value.
Really very misleading. Is GE out to mislead policy holders?

Reply
AM Tan says 5 years ago

Thanks for sharing my concern. I sincerely hope to see a more useful bonus statement that is beneficial to all policyholders

Reply
Jasmin says 5 years ago

I chuck my insurance statements aside.
Nothing is guaranteed (unless those statements that come with the word guaranteed) until one receives the payout.
Insurance agents always tell me “though projected values, based on past experience or track records, these values are highly reliable”. I take this as a pinch of salt.

Reply
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