By The Ledger desk · Last verified 7 October 2026
An endowment plan is a life insurance policy built mainly for saving. You pay premiums for a set period, and the policy pays out a lump sum when it matures, typically after 10, 15 or 20 years, or earlier if you die or, in most plans, become totally and permanently disabled. Part of each premium pays for that cover; the rest is invested. In a participating (par) plan, the payout has a guaranteed part plus non-guaranteed bonuses. If you surrender early, you receive only the cash value of the guaranteed amount and bonuses already added, which in the early years is often less than the premiums you have paid. MoneySense puts it plainly: you may not get back what you put in.
Endowments can be a calm, disciplined way to save for a known goal, such as a child’s university fees. The trick is to buy one you can keep to the end, and to read two numbers before you sign.
Quick facts
- Endowments usually mature after a fixed term such as 10, 15 or 20 years.
- Par endowments pay guaranteed benefits plus non-guaranteed bonuses; non-par endowments pay guaranteed amounts only.
- Once a reversionary bonus is declared and added, it becomes guaranteed.
- Policy illustrations for Singapore-dollar par policies use projected returns capped at 4.25% and 3.00% a year (since 1 July 2021).
- Surrendering early returns the cash value, which can be well below total premiums paid.
- You have a free-look period after receiving the policy to cancel for a refund, less any allowed deductions.
How does an endowment plan work?
Your premiums go into the insurer’s participating fund (for a par plan), which is invested in bonds, shares, property and cash on behalf of all par policyholders. Each year the insurer declares bonuses based mainly on how that fund has done, smoothing them so they do not swing too sharply from year to year.
| Part of the payout | Guaranteed? | What it means |
|---|---|---|
| Sum assured or guaranteed maturity value | Yes | Paid at maturity, or on death or total and permanent disability during the term. |
| Reversionary bonus | Not until declared | Declared regularly, usually yearly; once added it becomes part of the guaranteed benefit. |
| Terminal bonus | No | Paid only at maturity, on a claim or on surrender, and can change until then. |
| Cash dividends (some plans) | No | Paid out or left to accumulate; they do not add to the sum assured. |
A non-participating endowment skips the bonuses. You know exactly what you will receive, but the guaranteed return is usually modest.
How to read the policy illustration
Before you buy, you receive a Product Summary and a Policy Illustration (sometimes called a Benefit Illustration). The illustration shows, year by year, the total premiums paid and the surrender value and death benefit at two projected rates of return.
- Find the two scenarios. For Singapore-dollar par policies, the Life Insurance Association caps the higher illustrated rate at 4.25% a year and the lower one at 3.00%. They are projections, not promises.
- Read the guaranteed column first. That is the only figure you can count on.
- Compare total premiums paid with the surrender value in each year. The first year in which the surrender value at least equals premiums paid is your break-even year.
- Look at the cost lines, such as distribution cost and the effect of deductions, which show how much of your money goes to charges and commissions.
- Check the maturity value at both rates and compare it with what the same money might earn elsewhere.
What does surrendering early cost?
There is no separate penalty fee in most cases. The cost is built in: early premiums pay for distribution costs and insurance, so the cash value grows slowly at first. The simple sum is total premiums paid minus surrender value.
A worked example (illustrative figures)
Suppose you pay S$4,000 a year and stop after three years, so you have paid S$12,000. If your own policy illustration shows a surrender value of S$8,500 at that point, surrendering costs you S$12,000 minus S$8,500, which is S$3,500, before counting any interest you could have earned elsewhere. These numbers are made up to show the arithmetic; your illustration has the real ones for your policy.
Before you surrender, ask about the alternatives
| Option | How it works | Watch out for |
|---|---|---|
| Policy loan | Borrow against the cash value and keep the policy. | MoneySense warns interest can be steep; unpaid loans are deducted from payouts. |
| Reduced paid-up policy | Stop paying premiums and keep a smaller policy, where the plan allows it. | Lower maturity value and cover. |
| Wait for break-even | Keep paying until the surrender value catches up with premiums paid. | Only sensible if you can afford the premiums. |
| Surrender | Receive the current cash value and end the policy. | Cover ends; the loss in early years can be large. |
Which of these your policy offers depends on its terms, so ask the insurer for a written quote of each before you decide.
The WahLiao Verdict
Buy an endowment only for money you are sure you can leave alone until maturity, and size the premium so a job change or a new baby will not force you to stop. Judge it by the guaranteed figures, find the break-even year in the illustration, and use the free-look period to walk away if anything feels off. If you already hold one and are struggling, get the insurer’s written figures for a loan, a paid-up option and surrender side by side before you act.
Questions people ask
Will I get the illustrated 4.25% return?
Not necessarily. The 4.25% and 3.00% figures are capped projections of the par fund’s investment return, not the return on your premiums, and the actual bonuses can be higher or lower.
Can bonuses already declared be taken away?
Reversionary bonuses, once declared and added, become guaranteed. Future bonuses and terminal bonuses are not guaranteed and can be cut if the fund does poorly.
Is an endowment the same as a whole life policy?
No. Both can be par policies, but an endowment matures after a fixed term and is mainly for saving, while whole life cover lasts for life and is mainly for protection.
I bought one last week and regret it. What now?
Check your free-look period. Cancelling within it gets you a refund of premiums, less any deductions the policy allows, which is far cheaper than surrendering later.
Sources: MoneySense, understanding endowment insurance; MoneySense, participating versus non-participating policies; Life Insurance Association Singapore, illustrated investment rates for par policies. The Ledger explains; it does not advise.
Read next: The Free-Look Period: How to Cancel a New Insurance Policy and Get Your Money Back · Term, Whole Life or Investment-Linked: How Life Insurance Policies Differ · Back to The Ledger
For what’s worth it this week, with the bill shown, read The WahLiao Week.
Leave a comment