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Capital insurance provides protection coverage as well as investment returns to help you save for a specific financial goal in the future, such as sending your child to college abroad. However, when faced with financial uncertainty like a job loss or unexpected medical bills, it’s natural to dip into your savings account. But that’s not your only option; in fact, you can access funds from your endowment policy. Read ahead to understand your options and weigh the pros and cons of each.

Borrow money from your endowment policy

When you need access to cash, borrowing money from your endowment policy can be a quick and easy way to ease an immediate financial burden. A policy loan is usually issued by an insurance company using the cash value of your insurance policy as collateral for the loan. Policy advances have a few advantages. Firstly, even though this loan tends to charge a higher interest rate of 6% on average compared to bank loans, there are no preconditions required. Second, it lets you borrow money even when your unsecured debt is already too much to borrow from typical lenders. However, the loan amount is limited by the cash value of your existing policy. In addition, you must pay at least the interest on the amount borrowed, as this could cause your policy to lapse if nothing is done.

Withdraw money from your endowment policy

Some endowment policies offer cash benefit options, which are payable at regular intervals over the life of the policy. Depending on the options you chose initially, you can choose to withdraw the amount, use it to pay your premium, or simply keep it in your account to earn interest. Although the amount may be limited, this part can usually be withdrawn once you receive the cash benefits, and since it is already your money, there are no interest charges associated with this fund. emergency. Also, it is important to note that the withdrawal can only be made during the term of the policy, although such a request usually takes around one business day to process, and therefore will not be ideal if you need the money. at once.

Redemption of your endowment policy

Waiver of your staffing policy should be the last resort. Of course, there is the immediate benefit of receiving the full cash value of the policy minus the surrender charge. But the downsides of ditching your endowment policy outweigh the short-term benefit of having extra cash in your pocket. Once you redeem the policy, you will have to pay taxes on any gains made on the cash value portion of the endowment policy. Also, you will give up your coverage because surrendering the policy essentially terminates it. Finally, redemption fees can be quite high, which could wipe out a significant portion of the cash value.

Sell ​​your endowment policy

In cases where the immediate need for cash outweighs the benefits of keeping your policy, selling the endowment policy might be the right choice. You are likely to earn more than the cash value of your policy by selling it to a third party like REPs Holdings. This is complemented by a process called absolute surrender, where the third party pays you a lump sum above the cash value. Although the amount you will receive may vary, the benefits will certainly be greater than if you were to redeem your endowment policy. As an added benefit, there are absolutely no fees when you sell the endowment policy. In other words, the end result will generate a positive cash flow.

Ready to sell your endowment policy?

Deciding whether to redeem or sell your capitalization policy is a challenge. As you learn about your options, talk to a Staffing Policy Advisor about REP Holdings. For over 11 years, their team of experts has helped hundreds of people like you achieve a positive return on their staffing policy. Whether you are looking for personalized advice or want to know how much you could make selling your capitalization policy, contact +65 6221 4771 or [email protected] for a free consultation. If you purchased your endowment policy to create a financial safety net, consider your options carefully as there is no need to jeopardize your long-term goals by terminating your policy.