I have a protection based AIA ILP which requires forward paying “admin” fees which I have paid majority of it. Currently at 8k losses based on invested amount if I terminate it. Should I?

Hi anon,

I strongly advocate separating investments from insurance.

If the purpose of the ILP was for protection, you should be aware that the costs of insurance on the ILP are guaranteed to increase exponentially over time and will erode your investment returns (which are non-guaranteed). To me, it does not make sense to wait for the so called 'break-even' point to surrender the policy and switch to another alternative as by the time you reach that point, your age will lead to higher premiums, and your health may render you uninsurable.

If the purpose of the ILP was for investments, then there should be zero insurance coverage in the plan, but protection focused ILPs have a minimum sum assured that has to be maintain. As mentioned above, these will eat into your returns.

Although the decision to terminate is ultimately yours and yours alone, remember to have a suitable alternative in place before you terminate as your ILP, despite the drawbacks, is still providing you with coverage, and no one can say for sure what will happen to you in the coming weeks or months. The pain of realizing losses upon surrender does make many hesitate when it comes to going ahead, but you also need to realise that sunk costs can't be recovered, and you are going to have to find a way to recover your losses from elsewhere.

Have a chat with an advisor if you need to crunch numbers or have an in-depth second opinion. Good luck!

Perhaps you should get a second opinion about this issue from another FA - one who knows your situation well and isn't so hands off like your current agent.

Protection based ILPs are tricky and you should decide whether you're in it more for the protection or the investment.

I have an AIA ILP which I didn't want to service anymore so I just took a premium holiday and let the existing funds cover any cost of insurance. I took up other more targeted coverage (whole life, term plans) so that when the AIA ILP lapses, I'll be adequately covered.

Something for your consideration.

Investment-wise putting your money in a diversified index fund or even a wealth management platform should be more than sufficient to recoup your losses as long as you stay invested for the long term.

Read Hariz's breakdown of pros and cons of a 100% vested ILP.​​​