Investment Linked Policies (ILP)
Asked on 14 Jun 2020
Insurance-Linked policies are investment plans that include life insurance coverage. They can be classified into two categories:
1) Traditional Investment-Linked Policy - your premiums goes into both investment and insurance plan.
2) Pure Investment-Linked Policy - your premium will be 100% invested into funds
We recommend that you keep investment and insurance separated. Thus, if you are interested in Insurance-Linked Plan, do consider a Pure Investment-Linked Plan over a traditional one.
AIA Pro Lifetime Protector is a flexible Investment-Linked Policy. It provides good coverage for death, disability, and multi-stage critical illness while also you to invest. It also provides flexibility as you can access you cash through partial withdrawal after the second year if needed. However, it has low surrender value in the initial years and as with all investment, returns are not guaranteed.
If you would like to find out more, do send us an enquiry and we will follow up with you.
Pro Lifetime Protector is a protection-based ILP. If you will want your protection plan to have an investment aspect whereby there is a flexibility in you making withdrawals in the near future, this might be what you'll want to consider. Take note that not all your money will be invested at the start for Pro Lifetime Protector due to premium charges and you shouldnt be holding it for long due to the mortality charges that comes with age.
However if you are keen on making sure every dollar is invested, you will want to opt for AIA Pro Achiever instead. It's an investment based ILP whereby 100% premium-invested plan whereby you are opting a DCA approach for 12 years. There are free fund switches you can opt for anytime. I've had clients who bought this plan and utilized the free fund switches to capitalize on opportunities and manage potential losses.
Do make sure you know what are the funds that you are investing into. The performance of the fund, the prospects of the fund and most importantly, finding an agent who will manage your portfolio well. Do find out what are his systems of reviewing your portfolio with you!
The plan is as good as the agent managing it and the funds invested in. Feel free to let me know if you need to chat with someone to findout more!
Financial planning is an integral part of life. You can reach me here to find out more.
The best time to buy an investment-linked policy is when you know that the policy is able to help you achieve your needs or goals. Different investment-linked policies serve different purposes. Consequently, their advantages and disadvantages may or may not be of value.
In your example, AIA Pro Lifetime Protector's focus is on protection, while providing you with investment cash value. Some of its features include premium holiday, partial withdrawal, as well as the ability to make alternations to the policy after a stipulated period of time.
On other hand, there is investment cost associated with the policy, e.g. fund management fee. Furthermore, investmnet yields only non-guaranteed returns. As a result, you may suffer from a loss during an economic downturn.
To summarise, there is no one-size-fits-all answer for your question as different policies have different features. After we know your needs, we can do an in-depth evaluation of the policy to that end.
I share quality content on estate planning and financial planning here.
I also purchased an ILP last year, but to be honest, while it's not to say you won't get any good returns (perhaps it'll be decent, if things work out well), but I've been learning a general rule of thumb to keep insurance and investments seperate moving forward. One reason is ILP, as compared to say, ETPs invest on your own, have a very hefty management fee, and you may not feel it but it's eating into your savings.
Simple rule: Get Term (insurance), invest the rest.
Generally, a rule of thumb is not to mix insurance and investment (ILP). It would be better, in terms of cost and returns, to get them separately.
17 Jun 2020