Investment Linked Policies (ILP)
Asked 3w ago
I have a Aviva ILP maturing in 3 years time.
Yearly premium $2400 for 20yrs.
Total premium paid is $41K.
Basic Sum assured is 43K and Fund value is 11K.
Net surrender value is 44K.
What is the cash value? 44K or 54K?
I have no intention to surrender the plan now. Just want to find out what is the IRR for this plan. Appreciate some advice.
Net surrender value is the amount you get if you surrender today. This takes into account all loans that were taken from the policy.
The true IRR for the plan will need to be calculated manually. Largely because if this is an ILP with protection, a portion of the funds used monthly will be driven to pay for assurance and life insurance. You can request for your insurer to do one for you if required. Calculating IRR while disregarding the life insurance component is a fundamentally flawed approach for fund performance.
Call up your insurer, and request for an updated policy benefit illustration, they should be able to provide one with the current values of your policy.
Type of Plan
Firstly, we need to have a clear understanding of the mentioned plan. This is because a participating endowment policy is different from an investment-linked policy. Therefore, it will be good to know the exact name of the plan alongside with other details before we can give you the most accurate advice.
Generally, the sum assured refers to the death benefit that will be payable under the policy if death occurs to the insured. In most cases, this amount will not be paid upon the maturity of the plan.
In order to determine the most accurate surrender value, I will suggest for you to login to your online portal or to contact your agent for a revised policy illustration. This is for the purpose to let you understand the updated projection and figures for your policy. Thereafter, this gives you a better picture on the maturity value. Once you have this information, you wil be able to calculate the IRR.
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An ILP is different from an endowment plan. An endowment plan is a savings-sorta account that might give you a higher yield than bank savings accounts. An ILP is an investment product that doesnt guarantee returns.
You will have to consult your advisor on the current value of your portfolio. He should be able to find it online in the Aviva portal. Financial planning is an integral part of life. You can reach me here to find out more.