What are your thoughts when it comes to Investment Linked Policy?

Pros:

Accordingly to an insurance agent I know who purchased the same policy for herself, the premium is fixed throughout your life.

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Cons:

Very expensive for the amount of insurance coverage you get because of the high costs charged to invest on your behalf, and over time these costs add up and will deplete your investements significantly.

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If you are willing to spend the time to properly learn about investing which is a life skill, you will do so much better by investing on your own and use insurance purely for protection purposes.

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Hope that helps!

There are 2 types of Investment-Linked Policies:
1) Coverage-Oriented
2) Investment-Oriented aka 101 ILPs

As usual, it depends on your objective, and your preferences. Do you want coverage, or investment?

1) Coverage-Oriented
Coverage ILPs are whole life with investments and a feature which allows for liquidity (ie cash surrender for withdrawal) and premium holiday for the tough times.

Whether it is a WL policy, depends on the investment as the mortality and morbidity charges increase with age, so if the investment isnt doing well, the charges will overtake the investment values and poof, policy gone.

I see it better to be viewed as a product for the Critical Years with flexibility than a Whole Life Cover. Or something that you can use to supplement your base/foundation life coverage.

2) Investment-Oriented ILPs (aka 101 ILP)

These generally are 100% investments with a 1 to 5% additional death cover on the overall surrender value.

Generally, 101 ILPs have a limited pool of in-house funds (which doesnt necessarily mean they suck. It just means you have lesser options) as compared to unit trusts. They are also still more liquid/flexible compared to endowment savings.

The key feature would be nominating your beneficiary, eg family member, for faster estate distribution compared to being a frozen asset upon your demise.

Hope it helps!

Good question over here. I have been cracking my brain on the why for some time. And it boils down to 1 fact again which I have mentioned.

its just meant to reduce/remove the challenges of investing overseas where there is estate duty tax.

e.g as a foreign alien investing in US stocks, only the first $60k is tax exempted. Anything above, if it goes to your estate, will be subjected to a hefty 40% tax.

there are 3 ways to hedge this risk

(1) joint account with a loved 1 who can liquidate and transfer it to their account

(2) buy a term life insurance that covers it. The fees should be about 0.2-0.5% p.a of the intended coverage

(3) buy an ILP (hopefully with the lowest fees) to remove the tax.

however, with most fee structure, you will likely need to pay a range of 30k to 60k in fees for a 300k investment (after 20 years).
for Ireland domiciled,tax of 33% applies to foreign aliens after 310k. So take note not to invest above that.

We can only hope to learn more from each other. Credits to Chee Xiu Bin (great discussion) and Jonathon Chia GuangRong for the inspirations.

One thing for sure, it will first put money in the pocket of the ILP provider, then investment funds, and finally (if-any) the policy-holder.