Compare two similar policies using the same figures from their official documents.
Find the product summary and benefit illustration for each of two similar policies, and put any brochures to one side. The policies can be ones you already hold, ones you're being offered, or ones you've asked about. Allow about 25 minutes.
Use only the official documents because brochures are written to sell. A brochure chooses which numbers to show, and two brochures rarely show the same numbers. The product summary and benefit illustration follow a standard format, so the same items appear for both policies, and that is what makes a fair comparison possible. Check that each document is the current version, prepared for the age, premium and term you're actually considering. An illustration prepared for someone else, or for a different premium, won't give you your own numbers.
Advisers for competing plans often point to different numbers, such as a year 20 payout or a shorter premium term, and those numbers can't be compared directly. Aisyah was considering two savings plans from two different insurers. Each adviser told her their plan was better. One pointed to the year 20 payout and the other to the shorter premium term. She couldn't weigh a payout against a premium term, so she needed both plans described in the same terms, side by side.
Draw a table with one column for each policy and one row for each item. The rows are:
what is covered the main exclusions and any waiting period the premium and how often you pay the premium term whether premiums are guaranteed the guaranteed surrender value at two points in time the total surrender value at both illustrated rates, at the same two points the year the surrender value first exceeds premiums paid, at each illustrated rate and on guaranteed values only the total distribution cost
Fill each cell from the documents, using what you learned in lessons 5.1 to 5.3 about finding and reading the figures. Write the page number beside each figure so you can check it again later. If you can't find an item, leave the cell empty and mark it as missing. A missing item tells you something about the policy, and you'll come back to it at the end.
Aisyah's Plan A costs S$3,000 a year for 20 years, which is S$60,000 in total. Plan B costs S$3,000 a year for 15 years, which is S$45,000 in total. Plan A costs S$15,000 more, so comparing the two year 20 values in dollars would be misleading. She divided each value by the total premiums for that plan and wrote the result as a percentage.
At year 20, Plan A's guaranteed surrender value is S$55,000, about 92% of premiums paid. Plan B's is S$47,500, about 106% of its S$45,000. At the lower illustrated rate, Plan A's total surrender value at year 20 is S$66,200, about 110% of premiums, and Plan B's is S$58,900, about 131% of premiums.
Plan A's year 20 figures are larger in dollars, which is why its adviser led with them. Measured against what she would pay, Plan B returned more, both on guaranteed values and at the lower rate. A plan with larger dollar values can still return less relative to what you pay in.
She did the same with distribution cost. Plan A's total distribution cost is S$4,800, or 8% of its premiums. Plan B's is S$3,900, about 8.7% of its premiums. Plan A is slightly cheaper as a share of premiums, but the difference is small.
None of this made Plan B the right choice for her. A better return as a share of premiums doesn't make a policy the right one. It may still suit you worse because it has different cover or different exclusions, or because its premium is harder to pay in the early years, and any of these could still favour Plan A for Aisyah. Converting to a share of premiums puts both policies on the same footing, so your decision rests on the differences that are really there.
Next, compare the rows that aren't numbers. Read the exclusions, the waiting periods and whether premiums are guaranteed side by side. Two policies can differ more in what they exclude, or in whether premiums can rise, than in any value column.
Every empty cell becomes a question. Write it plainly, address it to the adviser or the insurer, and include the policy name. A good question is specific and answerable, for example: "For Plan B, what is the guaranteed surrender value at year 10, and on which page of the benefit illustration is it shown?" A vague question such as "Is this a good plan?" can't be answered in a way you can check.
Aisyah had two empty cells. Plan B's product summary didn't make clear whether premiums were guaranteed for the whole term, and she couldn't find the free-look period in the documents she had been sent. Each became a written question. Her third question came from lesson 5.3: she asked what she would lose by surrendering in year 5 under each plan, set out in writing.
When you've finished, you'll have one table with two columns. Every row is either filled in from the official documents with a page reference or marked as missing. Where premiums or terms differ, the key values are also shown as a share of premiums paid. Below the table are three written questions to have answered before you sign either policy.
This exercise covers only reading the documents. Choosing the type of policy you need and how much cover to get is taught in Insurance Decoded. The table alone won't tell you which policy to buy, and it isn't meant to. It shows exactly how the two policies differ, which is more than either brochure shows. The activity asks you to do this for two policies of your own.
Fill in the side-by-side comparison sheet for two policies. Then write three questions you would ask before signing either one.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).