I've recently gotten to know a private client who bought this plan.
Manulife Heirloom is a non-participating universal life plan and Version VII is the NEWEST of them as of this point of writing.
You may have been presented this solution by your adviser or at DBS treasures.
In general, universal life plans offers protection covering death while also building cash value. I have seen it recommended now with leverage to the policy and this article is to explain more on the plan.
How does the Manulife Heirloom VII plan work
Like all universal life plans, Manulife Heirloom (VII) is attracts a crediting of interest to the policy every year.
It is in USD and covers Death and Terminal Illness.
If you'd like to do legacy planning, it can be designed to provide your estate with death benefits.
What's MINIMUM crediting interest rate on policy
The minimum crediting rate guaranteed with Manulife Heirloom VII is 1.6% which is slightly reduced from Version (VI) which is at 2%.
This is unsurprising given the low interest rate environment since covid-19.
What's CURRENT crediting interest rate on policy
The current crediting rate on the policy is 3.7%.
With this current rate and at current charges, policy will build value up to around age85 where it peaks.
In the example below, from age 50 of US$280k builds a policy of up to $499,839 at age85 (blue).
After which policy charges are higher than the crediting rate.
Hence, policy surrender value starts to drop in value as the insurance cost (to cover US$1m) eats into the policy.
"Age 100 Advantage" benefit
At age 100, policy value increases with crediting interest and the coverage continues:
• NO further COI or Face Amount charges
• Interest will continue to be credited to the policy at the current crediting interest rate
• No additional premiums will be allowed at and after age 100
• Only loan repayments (if any) will be allowed and interest on outstanding loan will still be charged
Guaranteed Loyalty Bonus Crediting Rate and withdrawal facility
From year 11 to age100, plan gets an extra 0.35% guaranteed loyalty bonus crediting rate.
You may perform withdrawal without incurring surrender charge or reducing the face amount provided
if it is made after 10th policy year (from 11th year onwards).
There are some clauses to note which include
• Total withdrawal amount in a particular policy year does not exceed 5% of the policy value at the
previous policy anniversary.
• If withdrawn amount exceed 5% limit, the excess amount will be subject to surrender charge and will
reduce the face amount.
• Any unused free withdrawal limit will expire by end of policy year and cannot be carried forward to the
next policy year.
Leverage makes the plan appealing as a wealth accumulator
Current borrowing cost is very low now at around 1.2-1.5%pa.
With the minimum guaranteed crediting rate already at 1.6%, it may be favourable to leverage.
The main risk is if interest rates rise sharply.
Although leveraging is favourable now, I would still advocate being prudent.
As the brochure states "A legacy of abundance starts here", the primary value of the Manulife Heirloom (VII) is indeed best for legacy planning.
I can help you if you would like to piece it into your retirement planning and before that, inviting you to find out more on retirement planning.
Check out video below and SMASH ON THE LIKE TOO! =)