Recently, there has been confusion about “endowment insurance,” which is often advertised as offering returns of several hundred percent. However, when calculating the actual internal rate of return (IRR), it may be less than 3% per year. This raises the question of whether buying endowment insurance for investment is worthwhile. Before addressing this, Thairath Money invites readers to understand how many types of life insurance exist and what goals they serve.
Many people buy insurance knowing only the annual premium and potential refunds. However, it is essential to understand the type of insurance, as this becomes your cost. Basic life insurance policies are mainly divided into four types.
1. Term Insurance
This focuses on coverage in case of death during a specified period, such as 1, 5, 10, or 20 years. If the insured dies within that term, the claim is paid according to the insured sum. If the policy expires while the insured is still alive, there are no refunds or other benefits. Think of it like car insurance (non-life insurance), where you pay premiums for coverage over one year, for example.
Premium rates: Generally lower than other life insurance types because coverage is only for a fixed term.
Checklist before buying: No policy surrender value, no savings component, cannot borrow against the policy, premiums usually increase with age.
2. Whole Life Insurance
This provides death coverage over the insured’s entire lifetime, with Thai law currently limiting coverage to a maximum age of 99 years. Thus, claims can be made whenever death occurs according to the insured sum specified in the policy. Coverage is often set up to age 90 or 99, depending on the contract. If the insured lives to the contract’s end, benefits are paid per the terms.
Premium rates: Premiums are higher than term insurance.
Checklist before buying: Consider how many years premiums are paid and until what age coverage lasts; know which years offer refunds; examine the policy’s surrender value table to identify the break-even point, useful if you need to borrow against the policy or decide whether canceling causes a loss.
3. Endowment Insurance
This type focuses on two main points: 1) death coverage as per the policy, and 2) payment of benefits upon survival to the contract’s maturity. It usually specifies a clear term, like 10, 15, or 20 years, or pays out when the insured reaches a certain age.
Premium rates: Premiums are generally higher than term and whole life insurance.
Checklist before buying: Request the surrender value table before deciding; check how the insured sum changes over time, as it may increase with premiums paid; early cancellation after a few years may result in refunds lower than premiums paid; if focusing on returns, compare the IRR as well.How to calculate IRR)
4. Annuity Insurance
This emphasizes regular benefit payments. For example, if the contract states that once the insured reaches age 55, the insurer will pay benefits either annually or monthly depending on the policy. Payments continue until the contract expires or the insured dies. When benefit payments begin (called annuity), the cash value or life coverage may gradually decrease. Pay attention to this before buying.
Premium rates: Premiums are generally higher than other insurance types.
Checklist before buying: Know the age when annuity payments start; how many years of guaranteed payments; check if the IRR is acceptable; understand the benefit amount if the insured dies after annuity starts; always review the surrender value table, as some policies may pay less overall if surrendered during the annuity period—calculate carefully.
Example from finnomena with preliminary calculations under Term 15/15, Whole Life 99/20, and Endowment 15/25 conditions.
| Life insurance sum of 1 million baht. | Premiums (male, age 35). |
| Term Insurance. | Approximately 5,000 - 6,000 baht. |
| Whole Life Insurance. | Approximately 24,000 - 26,000 baht. |
| Endowment Insurance. | Approximately 70,000 - 90,000 baht. |
*Annuity insurance details vary by contract and are not exemplified here.
Additionally, these four life insurance types have more complex special policies combining "investment" features: Unit Linked and Universal Life. These focus on both life coverage and investment, differing in that
Anyone considering life insurance should spend time studying and researching the purpose of their purchase, as policy terms may vary significantly (including with or without dividends).
Regarding the recent endowment insurance controversy, many see it as partly due to misunderstandings or incomplete communication by life insurance agents. The Office of Insurance Commission (OIC) and insurers have continuously sought ways to ensure agents are transparent, knowledgeable, and clear in explanations, resulting in various measures, though complaints persist.
Initially, to help screen before buying a policy, consider this three-point checklist.
1. What is the purpose of buying? Be clear about your goal—for example, buying to provide a lump sum to loved ones if the unexpected happens, for savings, or for personal income tax deduction. Also crucial is whether you can afford premiums through the entire contract, as higher insured sums mean higher premiums, and most life policies require many years of payment. Canceling early due to unforeseen difficulties may cause loss of both time and money paid.
2. Is this insurance agent/broker legitimate? To reduce risk of dealing with unauthorized agents, you can verify through the OIC website athttps://smart.oic.or.th/eservice/Menu1If an agent fails to provide full facts, complaints can be made to the insurer. If unresolved, report to the OIC hotline 1186 or LINE OA: @oicconnect. Importantly, always pay premiums directly to the insurance company.
3. Study and understand key conditions before buying. Such as coverage, insured sum, benefit payment exclusions, premium payment dates and amounts, waiting periods for health or critical illness coverage.
After receiving the policy, verify personal information is correct and that policy details match what was agreed. Buyers have the right to "cancel the policy" within 15 days (or 30 days if purchased by phone), with refunds after deducting expenses and health check fees (if any), according to specified conditions.
Finally, before purchasing insurance, always understand the policy terms clearly. If asked how to buy life insurance most cost-effectively, the answer is “...” Ultimately, life insurance is a financial tool to manage life risks. While it may not always be financially profitable, if it reduces worry when facing the unexpected, that can be a form of value in itself.
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