What are Resale Endowment Policies? (REPs)
There is an old saying ‘Time is Money’
In the past, one can simply trade his time for money. You can always put in more hours into your job or business to earn more income.
However, if you have a lump sum of money on hand, can you trade it for time?
You can do so now with Resale Endowment Policies.
Resale Endowment Policies (REPs), also known as traded endowment policies/secondhand endowment policies are existing savings plans given up by the original owners before maturity. Instead of surrendering to the insurance company, they are sold off. Depending on the size of your investment, you can straight away jump into 5th, 10th,15th, 20th or even the last year of a policy!
You have just managed to skip the initial years of an endowment policy and invest directly into an endowment policy which has surpassed break-even point and derive the maximum benefits at the tail end of the policies.
The yearly bonuses declared by the insurance company will provide steady growth for the remaining term of your policy; while at maturity, you will receive a final maturity (terminal) bonus that is usually substantially larger than the annual bonuses.
By doing so, you do not have to start a savings policy from scratch and spent your precious years waiting for its cash value to build up. You can now get the maturity value sooner with REPs.
Essentially what you are doing is buying time(from someone else) and paying lesser.
What does it MEANS to the investor of a Resale Endowment Policy? (REPs)
As you only entered the policy during the high growth phase, you skip the slow growth whereby there are high policy costs (commissionsions/setup fees) involved in the initial years.
The returns of a 10-years REPs could give you double or more than the returns of a 10-years new endowment policy.
Instead of starting a new policy which can be 25-years long, you only need to continue the remaining tenure of REPs which in this case is only less than half of the required duration.
REPs allows the investor to park his money for a shorter duration and at the same time achieve a higher rate of returns, thus effectively jumpstarting his savings.