Great Junior/Income Advantage Series 2 : Whole Life Income Plan

On the past Monday and Tuesday, I posted about two bestselling product from Great Eastern insurance product reviews. Today, we are going to learn another special product known as tri-generation benefit plan by other company. On tomorrow and the day after that, I will cover another two quite popular insurance plan. Here is the schedule:

• Monday: Greatlife Portfolio Insurance (Regular premium investment-linked plan)
• Tuesday: Supreme Livin’Care Plus (Whole life living assurance policy with cash bonus)
• Wednesday: Great Junior/Income Advantage Series 2 (Whole life income plan)
• Thursday: Great Eduplanner (Education Endowment Plan)
• Friday: Supreme Care (Whole life non-participating plan)

Before Great Junior/Income Advantage (GJA) was launched several years ago, there are some other life insurance company such as Allianze and Hong Leong Assurance already selling similar products like hot cakes. You will find some insurance agency advertising heavily on newspaper (especially Oriental Daily on Monday), saying that their agent achieves MDRT with only 20-50 policies sold in a year. This shows that they actually sold big policy with large premium, usually in the range of more than RM10,000 p.a. per policy. To get big cases, selling insurance plan like GJA is an easier route to achieve the MDRT status.

What is MDRT?
MDRT stands for Million Dollar Round Table, is an association of Life Insurance agents who qualify by selling $1 million worth or more of Life Insurance coverage. The policies must meet certain qualification standards, and applicants must be members of the National Association of Life Underwriters. This is a worldwide recognition which most insurance agents are chasing for in their entire career. When you get the MDRT title, it shows that you are a great insurance salesperson who can sell tons of insurance coverage.

Plan Description

From the products write-up:

This is a Whole Life Assurance policy with cash bonus, maturing at the age of 87. After the policy has been in force for 10 years, a guaranteed cash payment of 4.25% of the Basic Sum Assured will be payable every year until the maturity or death of the Life Assured.

It is actually a whole life plan which covers the life assured until age 87. The special part is that when the policy has been in force for 10 full years, there will be a guaranteed income payable to the policyholder. How do we calculate the yearly income? Refer the example below

Example 1:
Let’s say you buy a GJA policy with basic sum assured of RM100,000 in 2007 at age 25. When you reach age 35 (after 10 full years), you will get a payment check from Great Eastern for the amount of RM4250 (4.25% of RM100k). You don’t have to pay the policy anymore after 10 years, and you will be guaranteed a constant income of RM4250 every year until the day you pass away or reach age 87 whichever is earlier.

The GJA plan is about 100% sold together with a special rider which is known as Junior/Income Advantage Riders (JAR). I will explain the function of the rider later in this article. Let’s first look at the feature of the basic plan.

Plan Benefits

1. Death benefit equals to sum assured plus accumulated cash bonuses (if any) and Terminal Bonus on Death (if any) will be payable in one lump sum

2. Total Permanent Disability (TPD) benefit are the same as death benefit above.

3. Survival Benefit which is the guaranteed cash payment of 4.25% of the Basic Sum Assured will be payable from the end of the 10th year, until maturity or death of the life assured, whichever is earlier.

4. Cash Bonus (Non-Guaranteed) - Starting from the end of the 2nd year, Cash Bonus will be declared annually on the Basic Sum Assured. Thereafter annual Cash Bonus will become payable on each policy anniversary, provided
the Life Assured is alive and the policy is still in force. Refer table below for the cash bonus schedule.

5. Maturity Benefit : Upon the survival on the Life Assured to the maturity date of the policy (age 87), Basic Sum Assured, Accumulated Survival Benefit (if accumulated with the Company), Terminal Bonus on Maturity and Cash Bonus (if any and if accumulated with the Company) shall be payable.

6. Terminal Bonus on Death or TPD (Non-guaranteed)

7. Terminal Bonus on Maturity (Non-guaranteed)

Of course this benefit had been simplified in order not to confuse readers. If you think these information is too technical, just skip it and read the conclusion below.

Why is GJA so attractive?

Before the introduction of investment-linked policy in 21st century, Supreme Livin’Care series is one of the most popular traditional whole life plan. SLC+ is so attractive probably due to these factors:

• Guaranteed protection increment - when the plan is converted into a fully paid-up whole life plan at the end of the 10th policy year, the Junior Advantage Rider Series 2 (JAR) will be terminated and the death and maturity benefit of the basic policy will be revised to 150% of basic sum assured.
• Only need to pay for 10 years - When the policy is converted into a fully paid-up whole life plan, there is no need to pay premium after that but still enjoy the protection up to age 87
• Yearly income receivable - starting from the end of the 10th year, the policyholder will get a constant income of a guaranteed 4.25% (of Basic Sum Assured ) plus a non-guaranteed 3.25% cash bonus every year. This serves like an annuity which can provide the basic living expenses. This income stream works like a pension scheme - you receive a constant payment as long as you live.
• Attractive maturity benefit - When the life assured passed away, the beneficiaries will receive the death benefit which is definitely more than the total premium paid. If the life assured can live up to age 87,he/she can still get a maturity benefit plus terminal bonus which is a few times more than the total premium paid.
• Force saving and force spending features - when you committed in such a saving plan, you need to pay the premium for 10 years consecutively. It forces you to save because if you don’t pay the premium, you might jeopardize the policyholder’s benefit. After 10 years, the income receivable is also not in a lump sum. This will tend to control your spending habit and make you do the right budgeting. This is the basic principle of being financially free — save as much as possible in the shortest time, and then spend accordingly for a longer period of time that won’t reduce the principle amount saved.

You will be interested to own a GJA plan if….

1. You are looking for a traditional plan that provides an annuity yearly income.
2. You are looking for a saving plan that gives potentially better return than fixed deposit.
3. You like the guaranteed features: guaranteed premium and guaranteed survival benefit
4. You don’t like to pay insurance premium in your entire life
5. You already have sufficient protection. GJA just serve as one of your force saving tool.

Junior Advantage Rider Series 2 (JAR)

Technically, this JAR serve as a very special supplementary benefit which is attached only to GJA plan. I won’t go in depth about the detail information of JAR. However, I will show you the functions of the JAR rider when it is attached to GJA. Almost 100% of GJA plan are sold with JAR attached.

Function 1: Built in Waiver of Premium with Dread Disease Benefit
In the event of the Life Assured is diagnosed to be suffering from any of the 36 illnesses covered by the Company, future premium up to the 10th annualized premium payment for both Great Junior Advantage Series 2 and Junior Advantage Rider Series 2 will be waived from the policy anniversary date following the above diagnosis.

It simply means that if the life assured is diagnosed with any of the 36 dread diseases, there will be no need to pay the insurance premium but still enjoy all the benefit of the GJA plan

Function 2: Option to convert GJA to Guaranteed Fully Paid-up Whole Life plan
Upon the survival on the Life Assured to the maturity date of the policy (age 87), no maturity benefit shall be payable under this Rider. This is because Junior Advantage Rider would have been terminated at the conversion date (i.e. at the end of 10th policy year) of the Basic Plan to a Guaranteed Fully Paid-Up Whole Life Plan.

It means that with the JAR attached, you don’t have to pay premium after 10 years (guaranteed)

Quotation Illustration

Since Cash Bonus and Terminal Bonus may vary depending on Company investment and operating performance, the illustrations show the possible level of benefits you may expect on two investment scenarios.
1. SCENARIO A = Assumes the participating fund earns 7.00% every year and the current operating experience of the Company continues
2. SCENARIO B = Assumes the participating fund earns 5.00% every year and the current operating experience of the Company continues

The bonus rates are greatly influenced by the capital appreciation of assets together with operating results and overall investment return experienced by the Company with respect to this type of plan. It will only be paid if the net returns earned by the Company support such bonuses. The actual bonuses payable may be higher or lower than illustrated.

Figure 1: A sample of GJA sales illustration generated with GELSIS 4.27

The quotation has 14 pages. If you are interested to read the quotation illustration in details, please contact me and provide relevant details such as date of birth, gender and budget.

Graphical Presentation

Figure 2: GJA sales illustration

You can download this power point slideshow that simplify the plan for better comprehension.
Download GJA presentation for adult
Download GJA presentation for child

Summary

Even though GJA is a whole life plan, but it provides features more like a saving plan because. I will illustrate a simple example: 30 years old male non smoker, bought a GJA policy with JAR attached, Sum assured RM100,000

• Premium to be paid is RM14,755 p.a. for consecutive 10 years. After that, there is no need to pay anymore
• Guaranteed income receivable after 10 years: RM4250/year
• Non guaranteed cash bonus starting from 2nd year as shown in Figure 3 (RM3250 10th year onwards for 7% return)

Figure 3: Cash bonus (non-guaranteed) illustration generated with GELSIS 4.27

• He will also get a maturity benefit as shown in Figure 4: between RM194,593 and RM278,372

Figure 4: Maturity benefit (non-guaranteed) illustration generated with GELSIS 4.27

Tomorrow I will share a plan that caters for education needs. Stay tuned!
By the way, if you have any question about GJA, please feel free to voice out in the comment.

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1. Buy term and invest the difference
2. How a medium family can retire comfortably (Real Life Case Study)
3. Average Monthly Household Income in 2007: Is it enough?