Should You Consider An Investment-Linked Insurance Policy?

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If you’re looking for a policy that offers both insurance and investment opportunities, perhaps an investment linked insurance policy (ILP) might be your choice. However, ILPs are not recommended for all types of risk profiles as they are deemed to be one of the more expensive and riskier plans you might take up. The simple reason being that investment-linked insurance policies (ILPs) are policies that have both life insurance coverage and investment components. 

How Does It Work?

Premiums are used to pay for units in (one or more) sub-funds of your choice. Some of the units purchased are then sold to pay for insurance and other charges, while the rest for investments. What ILPs cover would be insurance protection in the event of death; or if included, total and permanent disability (TPD) depending on the policy.

Types of ILP

In general, there are two types of ILPs:

Single Premium ILPs

  • Lump sum premium payment
  • Offer less insurance protection than regular ILPs 

Regular Premium ILPs

  • Regular premium instalments payment
  • Flexibility to adjust your insurance protection

The real question is: What’s the difference from Life Policies? 
While ILPs might sound similar to life policies, the difference lies in the flexibility of choosing the participating sub-fund. 

With ILPs, you have the freedom to choose from a variety of sub-funds that suits your investment style. Not only that, ILPs allow you to change your investments by switching sub-funds when your financial needs change.

ILPs allow you to change your investments by switching sub-funds when your financial needs change.

Is It For You?

The success of ILP will depend on the skills and decisions of the investor – you. However, ILPs are known to be better suited for those with a longer investment horizon so as to ride out market fluctuations and defray initial costs – which usually impacts short term investments significantly. 

You must also consider if you can afford to pay the premiums should you no longer have an income. To learn more about ILPs, drop us an email or get connected to an advisor through our Smart Search.

Written by

Cheryl Toh

Last updated on

May 21st 2020, 3:31 pm

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