Insurance Cash Dividend

It is very rare, but I have recently received a letter from a life insurer proposing me as the policy holder to encash all the bonus collected for a "well-deserved" holiday. Yes I am not wrong, the bonus is the accumulated cash dividend declared by the life insurer on yearly basis for one of my life policy, a 16 years old life insurance policy which I have been paying premium biannually without fail since my college days.

I called up the call centre for the life insurer to enquire on the proposal as I am little bit fishy on this. More importantly I would also like to check out the interest rates declared on the last few years of the cash dividend as I had not been receiving the statement for the bonus for the last couple of years. The call-centre agent responded hesitately that the previous interest rates declared was usually in the range of 4-5% on the account balances. The past returns were not bad, higher than the interest rates for the Banks Fixed Deposit for 12 months as the interest rate for our country is currently at its lowest. I figured out that the life insurer is trying to encourage the policy holders to encash th cash dividend so that it relieves the pressure for them to obtain a decent return similar to the EPF dividend for it's investment, with the limited investment vehicles for the life insurer.

With the lack of confidence for obtaining a higher return in these days (the equity and commodities like gold are all at their high), I have decided to leave it to the life insurer to work it out for me. A 4-5% return is good enough for me for a life policy and I would opt for premium holidays instead.