Investment Linked Insurance
Investment linked insurance (commonly referred to as investment linked insurance policies or ILP’s) life-insurance policies that provide a combination of investment as well as insurance coverage. The premium that you pay provides you with life insurance cover and purchase for you investment units in a linked and professionally managed fund. Since the 1990s, ILP’s have become very popular in Singapore and were introduced with the objective of providing the investor with extra value for his investment dollar. Before the financial crisis of 2008, total premiums collected in Singapore touched a peak of 3.3 billion Singapore dollars before dropping to the current level of $1.32 billion. An ILP in Singapore should be regarded as a risk management tool with superior returns when compared to non linked insurance products. You should not be taking out an ILP as a pure investment vehicle.
An ILP does not provide guaranteed cash value because the value of the policy depends on the value of the units which in turn depends on the performance of the investments in the fund. An ILP can be either a single premium policy where the entire premium has to be paid on a single lump sum or a regular premium policy where the premium is paid at periodic intervals. The investment linked fund pools all of the premiums paid by the various policyholders to be invested in a portfolio of investment assets according to the objectives of the fund. The value of units in the fund, which may be managed either by the insurer or an external fund manager, depends on the value of the underlying portfolio of investments.
ILP’s offer flexibility in your investment because you can make investments regularly or whenever you please, withdraw money from your investment and switch from one fund to another. You can also vary your level of insurance cover and take advantage of premium holidays during which you can stop payment of premiums without any effect on your plan. You also have the benefit of diversification because of the basket of investments in each linked fund so that all your eggs are not in the same basket.
Many insurers who offer ILP’s have a wide range of linked investment funds which are handled by professional investment managers. You can choose from this range of funds but remember to match the fund to your appetite for risk as well as your personal investment profile. For example, if you risk averse, you would be extremely uncomfortable with a high risk fund. You will also have the opportunity to switch funds over time as your investment profile and your risk appetite changes. Many insurers will allow you to certain number of free switches after which you will have to pay for the switch. When you are contemplating a switch, remember to check whether it is free and, if not, how much you will have to pay. Another advantage of an ILP is that once you purchase a plan, you are guaranteed insurance coverage regardless of any adverse change in the state of your health.
Tags: Insurance > insurance online > Insurance Singapore > Investment Linked Insurance > online insurance > singapore insurance
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