Before you sign: a 15-point checklist for endowment and annuity illustrations

This checklist sets out 15 things to verify in an endowment or annuity illustration and product summary before you sign. Each item says where to look, why it matters and what a red flag looks like. It works for participating and non-participating endowments, capital-guaranteed plans, annuities and retirement income plans. For a line-by-line explanation of the columns, read How to read a benefit illustration first.

How to use this checklist

Ask for the policy illustration, product summary and, where cover is bundled, the bundled product disclosure. MoneySense lists these as the documents you should receive. Then go through the items with a pen. A licensed representative recommending the plan must know your circumstances, assess your product knowledge and carry out a needs analysis under MAS Notice FAA-N16. Use those steps to get each answer in writing. Any item you cannot tick is a question to raise before the application, not after. The 14-day free-look period protects you after issue, but it does not replace reading first.

Group A: guarantees

1. Guaranteed maturity value or guaranteed payouts

Where: the Guaranteed column at maturity, or the guaranteed payout schedule for an annuity. Why: this is the only figure the contract promises. Red flag: the plan is described only by its illustrated total.

2. Guaranteed surrender values at years 5, 10 and maturity

Where: Surrender Value – Guaranteed. Note the first year in which it reaches total premiums paid (the guaranteed break-even year). Why: this is the earliest point at which you can exit without a loss under the contract. Red flag: the guaranteed break-even year falls after the date you may need the money.

3. Conditions of any capital guarantee

Where: product summary and policy terms. Why: "capital-guaranteed" usually means the surrender value at a stated policy year is not less than premiums paid, subject to conditions such as no alterations or partial surrenders. Red flag: "capital protected" with no year or conditions stated.

4. Illustration rates and the non-guaranteed share

Where: the rates printed above the non-guaranteed columns. For SGD participating policies, LIA caps them at 4.25% and 3.00% p.a. (since 1 July 2021). For USD plans, read the rates and notes in the illustration itself. Why: LIA says these rates "do not represent upper and lower limits". Red flag: the illustration rate described as the policy's return.

Group B: costs and liquidity

5. Effect of Deductions To-date

Where: the table "What is the impact of deductions on what you might get back?" in LIA's illustration format. Why: it shows how much of the projected value goes to insurance cost, distribution, expenses, tax and, for participating plans, shareholder transfers. Red flag: the section is missing or not explained.

6. Total Distribution Cost

Where: "How much are you paying for distribution costs?". Why: LIA states that it "is not an additional cost to you; it has already been allowed for in calculating your premium", but it reduces the value that builds up. Red flag: you cannot find this figure.

7. What happens if you stop paying or need cash

Where: product summary sections on non-payment, policy loans and reduced paid-up options. Why: MoneySense warns that policy loan "interest charges can be steep" on endowments, and "you cannot take a loan against annuity policies". Red flag: a regular-premium plan that does not fit your income over the whole premium term.

8. Early surrender cost

Where: guaranteed surrender values in years 1–5. Why: LIA's participating guide warns that you "may lose all or nearly all of the total premiums paid" if you surrender early. Red flag: no separate emergency reserve. Plans bought with bank loans add interest-rate and margin risk; see premium financing on saving.sg.

Group C: funding, nomination and tax

9. Currency of premiums and benefits

Why: a USD plan exposes SGD spending to exchange-rate moves in both directions. Red flag: currency risk not mentioned. See savings plans for international residents.

10. Funding route rules

SRS: MOF's SRS FAQ booklet (as of December 2017) allows single-premium products only (including recurrent single premium), caps life cover at three times the single premium, and excludes critical illness, health and long-term care products. Whether to accept SRS money is up to the product provider. CPFIS: the plan must be from an insurer included under CPFIS, the member must be the life insured, only single or recurring single premiums are allowed, and the plan is in SGD by default, although Annex A states that annuities, endowment policies and ILPs included under CPFIS can be denominated in other currencies, so check whether the specific plan is CPFIS-included in that currency (CPF Annex A). Red flag: a funding route proposed without these rules being checked. See Using SRS.

11. Nomination

LIA's 2026 nomination guide explains trust and revocable nominations, and states that trust nominations are not available for CPFIS and SRS policies. Revocable nominations are. Red flag: a legacy plan that relies on a trust nomination for an SRS-funded policy.

12. Tax position

IRAS lists endowment policies as not qualifying for life insurance relief. Annuities received by individuals are generally not taxable, except, among other cases, annuities bought with SRS money. For an SRS life annuity, 50% of each payout is taxable. Red flag: "tax-saving" used as a selling point. Readers taxed outside Singapore should take advice in their home jurisdiction.

Group D: after you sign

13. The 14-day free-look period

MoneySense states that all life insurers grant a 14-day free-look period, starting from the day you receive the policy documents. Premiums are refunded less medical and other expenses. Diary the date.

14. Product summary disclosures and the yearly bonus update

For participating plans, MAS Notice 320 requires the product summary to disclose the fund's asset mix, past returns, expense ratio and recent bonus rates. A bonus update must be sent every year. Keep each update and compare it with the original illustration.

15. Protection and dispute routes

The PPF Scheme covers guaranteed benefits only, within caps: S$100,000 of guaranteed surrender value per life assured per insurer for life policies, and S$100,000 of commuted value for annuities (SDIC). For disputes, FIDReC handles claims of up to S$150,000 each, free of charge to consumers; its process starts after a complaint to the insurer, and MoneySense advises approaching FIDReC within 6 months of the insurer's final reply.

Eight questions to ask your adviser

1. What is the guaranteed IRR at maturity, and the guaranteed break-even year?
2. How do the illustration rates compare with the insurer's 10-year participating-fund average return?
3. What were the bonus rates for this plan over the past three years?
4. What is the total distribution cost, and how does the effect of deductions change over time?
5. What happens if I stop paying after two years?
6. Why this plan rather than SSB, a CPF top-up or a fixed deposit for my horizon?
7. Which funding route (cash, SRS or CPFIS) applies, and what rules does it bring?
8. How will maturity proceeds or payouts be paid, and to which account?

Compare the answers against the alternatives in Endowments vs T-bills, SSB, FD and CPF, then follow the buying process. If you would like someone to go through these 15 points with an illustration you have received, you can register your needs through the contact options on this site.