facebookAre investment-linked policies the same as insurance savings plans? - Seedly

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          Anonymous

          18 Jun 2020

          Insurance

          Are investment-linked policies the same as insurance savings plans?

          If they are different, what are your thoughts on some of the best ILPs out there? And also, what are some of the best Insurance savings plans?

          TIA!

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              Discussion (6)

              What are your thoughts?

              Hariz Arthur Maloy

              Hariz Arthur Maloy

              22 May 2020

              Level 15·Independent Financial Advisor at Promiseland Independent

              Investment linked policies and traditional endowment policies (insurance savings plans) are very different.

              ILPs are invested in Mutual Funds/Unit Trusts or ETFs chosen by the investor, advised by the financial advisor, where you take all the risk of the market and funds chosen. There are no guaranteed returns and you get the full upside or downside to your portfolio.

              Within the ILP universe itself there are multiple types. Those with a sum assured similar to a life policy (and further sub sets of this), and those that pay just 1% above your Net Asset Value which is pretty much no insurance and is instead a pure investment allocated product. You get access to a RSP method of investing into equity, bond, commodities, property funds.

              Traditional endowment plans provide you with both guaranteed and non guaranteed bonuses paid from an insurer's participating fund which your money is invested in (but some are non participating and are fully guaranteed). You transfer all the market risk to the insurer and you receive smoothened bonuses on a conservative portfolio managed by the insurer. Most endowment plans today are also capital guaranteed when held till maturity.

              Traditional endowment policies come in all shapes and sizes and are meant to be used for goals based or due date financial commitments, like providing for funding for tertiary education, or a mid term goal of a house down payment, or planning for a source of income for retirement, or leaving a source of wealth as a legacy to grandchildren, or income for charitable purposes.

              The shorter your endowment policy, the lower your returns, the longer it is (25-100 years) the higher it is.

              I've seen short term endowment plans giving high 1+% to low 2% p.a. And I've seen long term endowment plans give up to 4.6+% p.a.

              There are no best plans, just plans that fit your goals and then shopping around for similar type plans after the goals for it is chosen.

              Instead work with a financial advisor as there products aren't "off-the-shelf" products and have to come with financial advice. Understand how they pay, when they pay, and the costs and benefits that come with them.

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                  PolicyPal

                  PolicyPal

                  18 Jun 2020

                  Level 11·Official Account at PolicyPal

                  No, an investment-linked policy is different from an insurance saving plan, otherwise known as endowment plan.

                  For an investment-linked policy, the premium is put in a fund that will be invested by the insurance company. You will be able to determine your allocation of asset that will maximise your long-term return. While it might have a higher rate of return, you will also have to bear the risk of the market.

                  Endowment policy constitutes less risk and is normally use for goal-based saving, such as university tuition fees or retirement. Unlike investment-linked policy, your money is placed in the Insurance company participating fund. Endowment policies, however, have a guaranteed component which investment linked policies do not offer.

                  If you have any other queries, feel free to tag us in your questions.

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                      Hey there!

                      They are both different products. Investment-linked policies (ILP) are an investment pro...

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