written by KCLau @ KCLau’s Money Tips
This article is a review and analysis of Supreme Care Insurance – a non-participating whole life plan from Great Eastern Life Assurance (Malaysia) Bhd. This post is part of the Great Eastern Product Reviews series.
Before this review, I have done a few reviews of Great Eastern products such as Great Protectlink Insurance (Investment-linked), Supreme Livin’Care Insurance (Living Assurance) and Great Income Advantage Series 2 (Whole Life plan). Supreme Care (SC) was launched way back before all those plan mentioned here. It is a very basic traditional plan. At the time of writing, there are more than 10 products available from Great Eastern plus all the variation and regularly modified rider attachment. I only cover a few which are the most popular and bestseller in this blog. You will find these articles as a reference point to guide you on planning your life insurance effectively.
Supreme Care a Whole Life non-participating policy, maturing at age 99. The Sum assured is payable if Life Assured becomes Totally and Permanently Disabled before age 60 or upon death.
What is Non-participating policy (non-par)?
A non-participating whole life policy has a level premium and face amount during your entire life. The advantages of such a policy are its fixed costs and relatively low out-of-pocket premium payments. Since the policy is non-participating it does not pay you any dividends. Non-participating means the premium paid will not be participating in the life fund investment.
1. Death and Total Permanent Benefit (TPD) Benefits
In the event of death (before age 99) or TPD (before age 65), the basic sum assured will be payable. This is a 2D plan (Death & Disability). Unlike SLC+, the sum assured will not increase over time.
2. Guaranteed Cash Value
Since Supreme Care is non-par, the premium won’t be invested. Thus, the surrender value or cash value shown in the sales illustration is 100% guaranteed
3. Maturity Value
If the life assured successfully survive until age 99, the sum assured will be paid by Great Eastern.
Supreme Care is suitable for these needs:
1. Funding a Buy Sell Agreement
Buy sell agreement is a part of business succession plan. It needs another long post to explain what is Buy Sell Agreement.
What is buy-sell agreement? In the sale of a business, a buy-sell clause in a shareholder agreement preserves continuity of ownership in the business and insures that everyone is fairly treated, the buyer as well as the seller. It is a binding contract between business partners or shareholders about the future ownership of the business. A buy-sell agreement is made up of
several legally binding clauses in a business partnership or operating agreement (or it can be a separate agreement that stands on its own) that can control the following business decisions:
- Who can buy a departing partner’s or shareholder’s share of the business (this may include outsiders or be limited to other partners/shareholders);
- What events will trigger a buyout and;
- What price will be paid for a partner’s or shareholder’s interest in the partnership and so on.
A buy-sell agreement may be thought of as a sort of “premarital agreement” between business partners/shareholders.
In order to ensure that the buying party will have sufficient fund to pay for the share value of a company when his partner dies, all the partners can be insured so that the insurance payout can be used. Supreme Care is a perfect plan for this situation.
2. Funding a private trust
When you set up some kind of trust, no matter it is a charitable trust, maintenance trust, or incentive trust, you need to pump in money into the trust fund for it to function. If the trust is meant to be functioning only after a person pass away, life insurance can serve as a more economic funding method. If you need a RM500,000 for the
maintenance of your children in case something happens to you, just buy a Supreme Care with the sum assured RM500k and assign it to the trust. This method is very cost effective.
3. Liability Cancellation
Liability include all kind of debt: credit debt, mortgage, business loan etc. Let’s look at the effect of mortgage. If you are the sole breadwinner of your family. You bought a house that accommodates your spouse and children. Probably the bank officers asked you to take up an insurance plan known as Mortgage Reducing Term Assurance (MRTA) to protect their mortgage your family. When something happens to you, the bank get the money and your family get the house. If there is no such arrangement, you are actually jeopardizing your family’s well being. Some of my clients prefer to take up additional personal insurance to cover their liability.
Sample of Sales Illustration
Mr. A bought a new house and took up a home loan of RM100,000. He is 30 years old. Instead of getting a MRTA (Mortgage Reducing Term Assurance), he bought a Supreme Care ( premium RM980 per annum with Sum Assured RM100,000). Figure 1 shows clearly the break-even analysis.
Figure 1: Break-even Analysis created with GELSIS 4.27
Red line (on top of the chart) – Death Benefit ( note that the death benefit stays level)
Green line: Guaranteed cash value
Blue line: Total premium paid
Figure 2 shows a page of the detailed sales illustration
Figure 1: Sales illustration created with GELSIS 4.27
The sales illustration has 5 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.
After 20 years serving the home loan, Mr. A still owe the bank RM20,000. So he decided to surrender Supreme Care and use the cash value of RM22,500 to clear off the loan.
Finally, let’s recap the main feature of Supreme Care
- guaranteed surrender value
- sum assured always stay level throughout whole life until age 99
- one of the most cost effective funding method for trust, buy-sell agreement, and liability cancellation plan.
- break-even point is around year 16. (total premium paid = surrender value)
Next week, we will discuss further about managing cash flow and net worth analysis.
If you missed the previous reviews, here they are:
Greatlife Portfolio Insurance – investment linked
Supreme Livinâ€™Care Plus – living assurance
Great Junior Advantage Series 2 – saving plan
Great Eduplanner – education plan