What are traded life policies and traded endowment policies
Traded life policies (TLPs) and traded endowment policies (TEPs) are investment products that involve purchasing life insurance policies or endowment policies from the original policyholder, and then paying the policy premiums until the policy matures or the life insured passes away. These types of policies are commonly referred to as “second-hand” policies.
When a policyholder decides to liquidate their life policy or endowment policy, they can do so through an individual or company that wants to buy the policy for resale. The intermediary usually offers to buy the policy at a higher price than the surrender value offered by the insurer and then resells it to another investor. Only existing policies purchased from the original policyholders are involved in this process, and no new policies are created.
TLPs and TEPs are not regulated by the Monetary Authority of Singapore (MAS), which means that intermediaries and distributors of these policies are not licensed by MAS. Investors who buy TLPs and TEPs are obligated to pay the policy premiums until the policy matures or the life insured passes away. The maturity date of the investment may be uncertain, and investors cannot rely on laws administered by MAS to take action against any problems encountered during the investment process.
Investors should carefully read and understand all the terms and conditions of any contractual document before buying a TLP or TEP. TLPs and TEPs have risks, including life extension, legal challenges, liquidity risk, credit risk, foreign exchange risk, and fraud risk. Investors should be aware of these risks before investing in TLPs or TEPs.