Wonder why Resale Endowments can pay 4%~5%? Explain.

1. Have you ever asked why Resale Endowments are able to give lifetime payout risk-free 4.1%?

2. What is the catch and where does the returns come from?

My reply:

1.  Insurers can also pay because their biz model comes from getting customers invest in them.  

2. Recently the policies Benefit Illustration was made to reduce their return projection, these insurers have to keep innovating to draw customers, in a small local market.

3. That's why we have to be careful which insurers we invest in, their fees n costs overhead. Ultimately can they keep delivering?

4. While they guarantee annual cashbacks, they will likely cut in their maturity payout.

As an illustration

Actually the original policy pays 3.+%, but because it was re-sold at a discount to us, our premiums were lower & discounted.

This allows us to now enjoy higher irr 4.+% ~ 5%, though the policy remaining terms and payouts are unchanged at 3.+%.  

That's the mechanism and benefits of Resale Insurance.

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My takeaway from Resale Endowments

1. Build a stable monthly income that pays a lifetime; 

2. Build up multiple lump sum payouts in shorter time, then re-invests ourselves.

3. Maturity payouts will likely cut. Beef up more policies to cover it.

4. Build up future income boosts that support & augment retirement expenses at future years.