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Explanation for the different figures for the surrender value
28 May 2022 (40 views)  

Mr. Y received a post sale benefit illustration (PBSI) for his policy in 2014 and an updated one in September 2021. 

There was a big difference in the surrender value for the 30th anniversary, as follows:

a) $129,817 in the PBSI - 2014.
b) $106,830 in the PBSI - September 2021

When Mr. Y checked the insurance company website, in May 2022, be found the surrender value to be $88,564. This is only two months short of the 30th policy anniversary in July 2022.

I studied the PBSI for the 2014 and 2021 and found the discrepancy to be due to the accumulated value of the cash dividend. It was shown to be $28,937 (PBSI 2014) and $5,950 (PBSI 2021). 

In making the projection in 2014, the insurance company accumulated the cash dividends for the next 8 years. During this period, Mr. Y withdrew most of the accumulated dividends to pay his premium and policy loans. Hence, the surrender value has been depleted by the amount withdrawn. 

The PBSI 2014 showed the terminal dividend to be $14,152 at end of year 29. It jumped to $29,280 at end of year 30. 

The surrender value shown in the website for May 2021 was based on the terminal dividend for year 29. If Mr. Y waited until July, the surrender value would increase by $15,128.  He would then get the higher figures shown in PBSI - 2021.

It is important for the policyholder to understand the figures shown in the benefit illustration. He should ask the insurance company to give a clear explanation of the various figures. 

He can also read my book, which is available here.
https://tankinlian.com/cart.aspx?ID=66

In this particular case, the insurance company did not reduce their bonus or surrender values. The difference in values is due to timing.  

Tan Kin Lian




 


Explanation for the different figures for the surrender value
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Mr. Y received a post sale benefit illustration (PBSI) for his policy in 2014 and an updated one in September 2021. 

There was a big difference in the surrender value for the 30th anniversary, as follows:

a) $129,817 in the PBSI - 2014.
b) $106,830 in the PBSI - September 2021

When Mr. Y checked the insurance company website, in May 2022, be found the surrender value to be $88,564. This is only two months short of the 30th policy anniversary in July 2022.

I studied the PBSI for the 2014 and 2021 and found the discrepancy to be due to the accumulated value of the cash dividend. It was shown to be $28,937 (PBSI 2014) and $5,950 (PBSI 2021). 

In making the projection in 2014, the insurance company accumulated the cash dividends for the next 8 years. During this period, Mr. Y withdrew most of the accumulated dividends to pay his premium and policy loans. Hence, the surrender value has been depleted by the amount withdrawn. 

The PBSI 2014 showed the terminal dividend to be $14,152 at end of year 29. It jumped to $29,280 at end of year 30. 

The surrender value shown in the website for May 2021 was based on the terminal dividend for year 29. If Mr. Y waited until July, the surrender value would increase by $15,128.  He would then get the higher figures shown in PBSI - 2021.

It is important for the policyholder to understand the figures shown in the benefit illustration. He should ask the insurance company to give a clear explanation of the various figures. 

He can also read my book, which is available here.
https://tankinlian.com/cart.aspx?ID=66

In this particular case, the insurance company did not reduce their bonus or surrender values. The difference in values is due to timing.  

Tan Kin Lian