During this week from Monday to Friday, I will post a series of Great Eastern insurance product reviews. It was schedules as below:
- Monday: Greatlife Portfolio Insurance (Regular premium investment-linked plan)
- Tuesday: Supreme Living 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 the launch of Supreme Livin’ Care Plus (SLC+) back in 2005, there are several older “version” of this living assurance plan, such as Supreme Livin’ Care and Supreme Livin’ Care Series 2. When Bank Negara Malaysia (BNM) required a new implementation of traditional plan that apply the asset share method of cash value calculation, the introduction of SLC+ is the answer from Great Eastern Life Assurance Bhd.
SLC+ is a Whole Life Living Assurance policy with Cash Bonus, maturing at the age of 87. After the policy
has been in force for one year, a series of non-participating Deferred Whole Life as a percentage of Basic Sum Assured. I will explain about the deferred protection below.
Living Assurance provides a lump sum payment if you suffer one of the 36 critical illnesses/dread diseases. In layman term, SLC+ provides a lump sum to policyholder who either suffered from 36 critical illness, Total Permanent Disability (TPD), or Death whichever comes first. In insurance industry, these coverage are normally known as 3D.
What is 3D?
It is not three dimensions :). 3D refers to Death, Disability, Diseases which is the most common life protection provided by insurance companies.
This payment may allow you to take early retirement, pay off outstanding debts or even take a holiday – whatever you need to assist you with your recovery.
The lump sum amount payable is:
total sum assured = basic sum assured + deferred whole life sum assured
Total amount claimable * = Total Sum Assured + Accumulated Cash Bonus (if any) + terminal bonus (if any)
* Total Amount claimable is the amount of money you will get when you make a claim in the future.
Besides getting the protection, policyholders are also entitled to have
- Terminal Bonus on 3D for policies in force more than 20 years
- Cash Bonus – Starting from the end of the first year, Cash Bonus will be declared at the discretion of the Company annually on the Basic Sum Assured but this bonus is kept by the Company and the policyholder has to continue paying premiums.
What is whole life insurance?
A whole life insurance policy covers you for your entire life, not just for a specific period such as term insurance. Your death benefit and premium in most cases will remain the same. Whole life insurance also builds cash value, which is a return on a portion of your premiums that the insurance company invests.
Why is SLC+ 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 – the deferred Sum Assured explained below provides guaranteed increase in sum assured. For example, when a policyholder bought SLC+ at age 25, he will get guaranteed 140% protection amount 10 years later at age 35. This features provides hedge against inflation. You still pay the same amount of premium, but get a higher protection at later stage of life.
- Guaranteed premium – Due to the increasing probability of illnesses claim, most plan that provides 3D coverage in the local market doesn’t provide guaranteed premium. With the rapid enhancement of medical equipment and facilities, illnesses are diagnosed earlier, sometimes even before it becomes critical. Furthermore, due to the lack of exercise and defective diet, more and more people are contracted with cancer, kidney failure, heart attack, strokes and all sorts of dread diseases. So it is foreseen that the insurance premium will likely be raised in the future. Thus, the guaranteed premium feature will provide the peace of mind to policyholders.
- Cash value illustrated in the sales quotation is very conservative and most likely will be met by insurance companies. Based on the previous history of bonuses declared, meeting the projected cash value will not be a big issue for Great Eastern.
- Option to Buyback – in the event of life assured is diagnosed to be suffering from any one of the 36 illnesses covered (except Terminal Illness or Full-blown AIDS), the life assured shall be given the option to buyback the death benefit up to the maximum of the basic sum assured. It is commonly understood that when a person suffers from any of the 36 diseases, he will not be eligible for any new insurance protection. In other words, if you got cancer, you can’t buy any more insurance. However, the buyback options of SLC+ provides you a second chance to buy another policy that covers death only. When death occurs later, your beneficiaries can still claim the death benefit. In my understanding, SLC+ is the one and only plan in Malaysia that provides this advantage to policyholders.
You will be interested to own a SLC+ plan if….
- You are looking for a traditional plan that provides average protection with average cash values.
- You don’t like the fluctuation of fund performance that ties to investment-linked policies
- You are young and healthy
- You like the guaranteed features: guaranteed premium and guaranteed deferred sum assured
- You prefer conservative investment
- You want a 3D protection until very old age (87)
Now, let’s look at the deferred protection. In the policy of SLC+, this feature is called Deferred Whole Life (DWL).
Figure 1: Details of Deferred Whole Life
Refer figure 2 for the illustration of the sum assured with DWL. Picture worths a thousand words.
Figure 2: Illustration of Deferred Whole Life
Since you will still be paying the same amount of premium for the entire term (until age 87), you will feel that you are paying less and less premium, but getting more and more protection. Why is it so?
When you get more and more cash bonus every policy year, you will feel in a way that you actually pay less premium if you opt to withdraw the cash bonus. When the DWL kicks in at 2nd policy year, you will get more protection over time. That’s why I said that you will realize that you had actually “locked in the benefit of paying less premium for more protection in the future“.
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.
For the purpose of this illustration, the bonuses shown in columns (K) and (L) are assumed. The bonuses included in the illustration have not been declared in the past. These bonuses are included based on the Company’s expectations of future operating results and the investment rate assumptions shown above.
Figure 3: A sample of SLC+ sales illustration generated with GELSIS 4.27
The quotation has 9 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.
Figure 4: SLC+ graphical line chart illustration
Red line – Total benefit claimable
Green line – Cash value
Blue line – total premium paid
Do you notice that the green line intersect with the blue around 14th year? It means if you surrender the policy after 14 years, you will probably get back all the premium paid without interest. After that, you will get a return from your premium. The longer you pay the premium, the better is the return. Please refer my article that shows the Return of Investment of insurance policy.
Popular Supplementary Benefit – Reducing Term Rider Plus
Reducing term rider plus (RTRP) is a non-participating rider that give 3D coverage that reduces annually by level amount of initial sum assured for each completed policy year. There is a situation when this RTRP will come in handy. For example, you need a RM150,000 3D coverage. The premium is RM5145 p.a. for 30 years old male non-smoker. But you can only afford premium that is less than RM4000 a year.
To work with the tight budget, the SLC+ plan can be designed with basic sum assured of RM100,000, and additional RTRP of RM50,000. The premium is
- Basic SLC+ RM100k – premium is RM3430 p.a.
- RTRP RM50k – premium is RM186.50 p.a. only.
- Total premium = RM3616.50
You will still get the RM150k coverage. But of course the cash value will be less when compared with a basic plan of of SLC+. The increment of sum assured will be significantly at lower rate too.
Since there is no such plan as the best insurance plan, every insurance products has its potential market. Unlike Greatlife Portfolio Insurance that I reviewed yesterday, SLC+ is a traditional plan that provides conservative return and many guaranteed features. Some risk averse people will find it attractive. But those who are more aggressive would think that SLC+ is not so appealing to them. Talk to your insurance agent to plan your protection that suits your needs and circumstances.
Tomorrow I will share a plan that caters for retirement needs. Stay tuned!
By the way, if you have any question about SLC+, please feel free to voice out in the comment.