Endowment Insurance

Participating Versus Non-participating: Find the Best Endowment Insurance Plan in Singapore for You

An endowment plan is a two-for-one product. It provides insurance coverage but also bonuses based on investment returns. Is it the same as an investment-linked plan? What endowment plan should you choose?

What Is an Endowment Plan?

An endowment plan is a two-for-one product. It provides insurance coverage but also bonuses based on investment returns. Before you go running for the hills, endowment plans are not the same as the infamous investment-linked plans. The two are quite different, but more on that later.

Endowment plans are policies that give you insurance coverage and act as a savings plan. Their primary aim is to help you meet your financial goals. This can include saving up for your children’s future education or preparing a decent sum of money for a happy retirement. Many buy endowment plans for exactly those reasons.

An endowment plan has the potential to be very useful to you, provided you understand exactly what you are signing up for.

Endowment Insurance Plans
Single (Lump Sum) or Regular Premium Payment
Fixed Maturity Time
Comes with a Life Insurance Component
Some Guaranteed Money
Short-Term and Long Term Plans Available

Characteristics of Endowment Plans

Before diving into the various policies out there, it is important to understand what endowment plans are. The majority of the endowment plans on the market today have these traits in common:

1. Single (Lump Sum) or Regular Premium Payment

There are two types of payment system for Endowment Plans.

Regular premium payment, which require regular payments throughout the duration of the plan. These payments can be monthly, quarterly, or even annually. The amount you pay for this premium may also differ from policy to policy. Nonetheless, recurring payments are commonplace when it comes to endowment plans.

The other type is a single (lump sum) payment paid when you purchase the endowment plan.

2. It Is an Insurance Plan

All endowment plans come with an insurance component (usually life insurance). When you pay that monthly premium, a part of that money goes into your insurance coverage and whatever is left goes into an investment fund. Each company and plan may differ in the exact ratio of investment to insurance.

3. Fixed Maturity Period

Endowment plans run for a pre-allocated amount of time, ranging from three to twenty years. Short-term plans, like the Tiq 3-year plan, are much rarer since investments tend to do better in the long run.

Once your plan matures, you will receive payment. Sometimes, consumers do not know the exact amount they will be receiving. Providers will usually quote a sum when you sign up, which is the smallest amount you will get once the plan matures.

Do note that this value may be smaller than the sum of your premiums, depending on the type of endowment plan.

Introduction to Participating Versus Non-participating Endowment Plans

Then you might ask: what are the types of endowment plans available? True to the title, there are primarily two types of endowment plans – participating and non-participating. Both of these can vary in many ways, and it is important to understand the difference between the two.

Participating Endowment Plans

When you sign up for a participating endowment plan, you are agreeing to have a share in the profits of an investment fund. So, you will be provided dividends determined by the performance of the fund. Payout consists of two parts:

1.The Sum Assured

This is a fixed amount of money you are promised. Once you cash out after the policy matures, you are guaranteed this sum in full.

2. Non-guaranteed Benefits

Non-guaranteed benefits are any bonuses from the investment fund. This depends on how well the fund performs so these can be high but also very low. Insurers typically provide clients with an estimate of how much money they stand to gain based on past results, but none of this is guaranteed.

How do Participating Endowment Plans work?

A fraction of the premium paid by all the policyholders will be pooled together into a single fund. This will then be invested into various assets like corporate bonds, properties, and many more. Every insurance provider has a different strategy but they all have one goal: to have large returns for the policyholder and the company.


There are three main types of bonuses you stand to gain should you decide to sign up for a participating endowment plan.

1. Reversionary Bonuses

Your policy provider will regularly declare a reversionary bonus. Reversionary means ‘right to own’ and so once a reversionary bonus is declared you will have a right to that amount. This bonus will be added to the guaranteed sum of your policy. In other words, if a policy provider declares a reversionary bonus, you are assured this money in full.

2. Cash Dividends

On the other hand, cash dividends do not contribute to the assured sum. Instead, these are immediate cash payments which the policyholder can choose to withdraw, apply to future premiums, or reinvest with the provider.

3. Terminal Bonuses

Not to be confused with reversionary bonuses, a terminal bonus is a payable lump-sum you may get once your policy matures or when you make a claim. Terminal means ‘at the end’ and so a terminal bonus is another bonus you stand to gain after the maturity period.

Surrendering a Participating Policy

As the insurance component of an endowment plan is life insurance, the cost of prematurely ending a policy is extremely high.

Furthermore, the payout you will get may be very low, or less than the sum of the premiums paid thus far. This payout comes from a cash build-up of declared bonuses. Usually this only occurs after a minimum period and the value of the cash build-up may not be much less than the premiums you have paid so far.

Hence, it is recommended that you are ready for consistent premiums and the high commitment that comes with the plan before you sign up for it.

Is Participating Endowment and Investment-Linked the Same Thing?

Short answer: no. They are similar in the sense that they both have investments involved and are frequently confused for one another.

In an investment-linked plan, you are not guaranteed any returns upfront. In comparison, a participating endowment plan guarantees you a baseline sum. You will receive at least this baseline sum in full once the policy matures. Any other investment-linked benefits fall under non-guaranteed bonuses and are simply extra treats.

There are more differences between the two but for the most part, the sum assured is where they diverge the most.

Benefits and Risks of Participating Endowment Plans

The benefits of such plans are plenty.

1. Grow Savings and Get Insurance

A participating endowment plan can be great for people looking to grow their savings as well as get an insurance package. It may be cheaper than attempting to do both individually.

2. Safer option than investing on your own

Insurance providers typically hire seasoned professionals to take charge of the investment fund. Since money is pooled from other policyholders, the portfolio of a fund can be diversified, making returns much more stable. Participating endowment plans are considered a low risk investment.

But, just as traditional investments are risky, so is a participating endowment plan.

3. Risk of Small Returns

Markets are volatile and losses may be all too real. This is why many people steer clear of participating endowment plans, especially when the sum guaranteed is smaller than the total premium you pay. A participating endowment plan is not for the faint-hearted.

Non-participating Endowment Plans

Non-participating endowment plans are fairly simple as these do not include any non-guaranteed benefits.

As a policyholder you will not be entitled to any profit the company makes, and the money you receive when the policy matures is guaranteed. There is no investment involved. So if you are risk-averse and prefer to be on the safer side, a non-participating endowment plan can be something for you to consider.

Surrendering a Non-participating Policy

Like its participating counterpart, the cost of prematurely liquidating a non-participating policy is also very high. Additionally, non-participating policies may not have any surrender value as there are no declared bonuses. It is important to do your research and understand how much you may actually receive if you wish to prematurely cash in your policy.

Here’s our advice: don’t.

Key Takeaways

Summary of Participating Versus Non-participating Policies

More RiskyLess Risky
Stand to Gain Initial Sum and Additional BonusesStand to Gain Only Initial Sum Assured
Potentially Higher Surrender ValuePotentially Lower Surrender Value

Are Endowment Plans For You?

You need insurance coverageYou already have insurance coverage
You need a relatively stable investmentYou are looking for high returns (redirect to stocks or SSB)
You are ready to commit long termYou should not be making long commitment


Depending on your current financial situation, saving habits and future life goals, endowment plans can be something worth considering for all the benefits they provide their holders. If you want to learn more, check out some of the best endowment plans here. Regardless of whether you choose to sign up for an endowment plan, we hope that this article has helped you become better informed to make the best choice for you.

Tan Boon Hun

Boon Hun spent over five years in the content marketing space as the managing editor of Goody Feed creating interesting and relevant content for the social media generation. In 2022, he moved to the FinTech space while remaining true to his roots, intending to bring financial literacy to more people in Singapore. When not doing his work, he can be found watching people build homes on YouTube.

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