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If I run out of CPF monies to pay the premiums of my Academic Staff Provident Fund Approved Investment Scheme (ASPFAIS) Part V insurance policies, what should I do?

You have the following options:

  1. Use cash to pay the premiums;
  2. Convert your Part V insurance policies to a paid-up mode1; or
  3. Activate the Automatic Premium Loan (APL)2 or Extended Term Insurance (ETI)3 feature(s) of your Part V insurance policies, if they have such features and if your insurance company allows you to do so.

Converting a policy to paid-up mode means that the policyholder will not need to pay premiums anymore. The sum assured of a paid-up policy is usually lower than that of the original policy. All supplementary riders attached will be terminated.

APL means that once the policy has accumulated sufficient cash value, if the policyholder is unable to pay the premium, he can borrow from the cash value. However, he is required to pay back the loan and compound interest. Once the loan plus compound interest exceeds the cash value of the policy, the policy will lapse.

ETI means that if the policyholder still wants the insurance protection but doesn't want to pay any more premiums, the existing cash value of his policy is treated as a single premium which is used to buy protection for future years. The number of years of protection he will get varies directly with the quantum of the cash value.

The difference between a paid-up policy and ETI is that:

  • A paid-up policy has lower sum assured than the original policy but ETI has the same or higher sum assured than the original policy (assuming no indebtedness);
  • A paid-up policy will mature on the same date as the original policy, whereas for ETI, the maturity date may or may not be the same date as the original policy as the period of cover depends on how much cash value there is in the original policy and the policyholder's age on the date of premium default.