You will compare two similar policies on the same figures from their official documents.
Aisyah ended up with two savings plans to consider, from two different insurers. Each adviser had told her theirs was better, and each had pointed to a different number to prove it. One talked about the year 20 payout, the other about the shorter premium term. She couldn't compare a payout with a premium term. She needed both plans described in the same terms, side by side.
This exercise builds that comparison from the official documents alone. Allow about 25 minutes. You need the product summary and benefit illustration for each of two similar policies, ones you hold, are being offered, or have asked about.
Put the brochures away. They're written to sell, they choose which numbers to show, and two brochures rarely show the same ones. The product summary and the benefit illustration follow a standard format, which is what makes a fair comparison possible.
Check that you have the current version of each, 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 numbers.
Make a table with a row for each item and a column for each policy. The rows are: what's covered, the main exclusions and any waiting period, the premium and how often you pay, the premium term, whether premiums are guaranteed, guaranteed surrender value at two points in time, total surrender value at both illustrated rates at the same points, the year surrender value first exceeds premiums paid at each rate and on guaranteed values only, and total distribution cost.
Fill in each cell from the documents, as you learnt in lessons 5.1 to 5.3, and note the page beside each figure. If you can't find something, leave the cell empty and mark it. That's information too.
Here's where Aisyah's two advisers had talked past each other. Her figures below are made up to show the method.
Plan A charges S$3,000 a year for 20 years, S$60,000 in total. Plan B charges S$3,000 a year for 15 years, S$45,000 in total. Comparing their year 20 values directly is misleading, because she pays S$15,000 more into Plan A.
So she compared each value as a share of the premiums paid. At year 20, Plan A's guaranteed surrender value was S$55,000, which is about 92% of what she'd pay in. Plan B's was S$47,500, about 106% of its S$45,000. At the lower illustrated rate, Plan A's total surrender value at year 20 was S$66,200, about 110% of premiums, and Plan B's was S$58,900, about 131%.
Plan A's year 20 figures were larger in dollars, which is why its adviser led with them. Measured against what she'd pay, Plan B returned more, on guaranteed values and at the lower rate. Its total distribution cost was S$3,900, about 8.7% of its premiums, against Plan A's S$4,800, which is 8%. So on that item Plan A was slightly cheaper as a share, though the difference was small.
This doesn't make Plan B the right policy. It may suit her worse in other ways: different cover, different exclusions, a premium she'd find harder in the early years. The exercise is to put both on the same footing so that whatever she decides, she's deciding on real differences.
Also compare the rows that aren't numbers. Two policies can differ more in what they exclude, or in whether premiums can rise, than in any value column.
Any empty cell becomes a question. Write it plainly, addressed to the adviser or insurer, with the policy name. "What is the guaranteed surrender value at year 10 for Plan B at my premium?" is answerable. "Is this a good plan?" isn't.
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'd been sent. Her third question was the one from lesson 5.3: what she'd lose by surrendering in year 5 under each plan, set out in writing.
Choosing which type of policy you need, and how much cover, is taught in Insurance Decoded. This exercise stays with reading what you've been given. It gives you a fair basis for that choice, and the questions to ask before you make it.
You finish with one table, two columns and every row filled in from the official documents, each 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 you'd want answered before signing either policy.
You won't know which policy to buy from the table alone, and you're not meant to. You'll know exactly how the two differ, which is more than either brochure told you. The activity asks you to do this for two policies of your own.
Complete the side-by-side comparison sheet for two policies and write three questions you would ask before signing either.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).