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Have your Financial Advisor shared with you Traded Endowments / Traded Life Policies? Is it Legal?

There are many investment options, and with each evolution of the economy, the structure of financial plans are more diverse now with each different type of vehicle. One that that might be relatively new to many Singaporean still, is Traded Endowments / Life Policies (TEP/TLP).

One frequently asked question that always comes up in every discussion on TEP and TLP is, "is it legal to buy and sell them in Singapore" and is there anything that we need to be aware of?

The short answer to whether is it legal is “Yes” and here are some relevant facts / information (from MoneySense) which are good to know.

Fact #1

Traded life policies (TLPs) and traded endowment policies (TEPs) are not regulated by the Monetary Authority of Singapore (MAS).

Investors who buy TLPs and TEPs cannot rely on laws administered by MAS to take action against either the intermediary who re-sold or packaged the policies or the distributor of the policies should they encounter any problems with the investment process.

Investors can, nevertheless, seek recourse under the Consumer Protection (Fair Trading) Act (CPFTA). The CPFTA allows consumers aggrieved by unfair practices to pursue civil remedies before the courts.

What does it mean?

It means that you are pretty much on your own when you deal with TEPs/TLPs. It is important to do your own due diligence or seek assistance from someone that is well versed in TEPs/TLPs.

Fact #2

When a policyholder decides to liquidate his life policy or endowment policy, he may do so via an individual or company that wants to buy the policy for resale. Such an intermediary usually offers to buy the policy at a price higher than the policy’s surrender value offered by the insurer.

What does it mean?

This pretty much sums it up for Policyholders. They are getting better value selling than surrendering (if they manage to find an investor to buy over). This remains a fact that many policyholders are unaware. Now that you know, please help share with your friends and family as the Insurers does not, at this moment in time, inform their Policyholders of this fact.

Fact #3

The obligation of paying the policy premium is transferred either to the investor or an intermediary who has purchased and is holding on to the policies with the intention of re-selling them to a further investor.

What does it mean?

It simply means that the individual who bought over the policy is responsible for future premium.

How is the “Buying and Selling” done?

Absolute assignment which is governed under Policies of Assurance Act (Chapter 392) is an “enabler” of TEPs/TLPs.

Absolute assignment are rights of the policyholder and insurance companies possesses relevant forms and processes to facilitate such assignment request.

Have you heard of gifting of policy from Parent to Child, or to Charity?

That same absolute assignment process is used in TEPs/TLPs between buyer and sellers and that’s how the “Buying and Selling” is done.

What to do now?

If you are considering selling your policy (instead of surrendering) or considering to buy (invest) into pre-loved policy, do contact your trusted financial advisor, or even me if you are comfortable about it.

#TradedEndowment #ResaleEndowment #Endowment #Wholelife #Insurance


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