Navigating ILPs: What you need to ask your financial adviser

You might have vaguely heard of the term "ILP" and whether purchasing one might be a good idea.


After all, many of your friends and family members are either buying one or talking about it. But what exactly is an ILP and what should you know about it?

What is an ILP?

ILP is short for “Investment-Linked Plan”, a life insurance policy which provides a combination of protection and investment. Premiums buy life insurance protection and investment units in professionally managed investment-linked fund(s).

ILPs do not provide guaranteed cash values. The value of the ILP depends on the price of the underlying units, which in turn depends on how the investments in the fund perform. Fees, expenses and insurance charges for an ILP are paid for through a deduction of the premium and/or sale of purchased units.
 

ILPs can be broadly classified into two categories:

·         Single premium ILPs where the premium is payable in one lump sum;

·         Regular premium ILPs where on-going premiums are payable
 

Ok, so now you know what ILPs are. What’s next?
 

As with any life insurance plan, you need to make sure that it’s suitable for you before you buy. This is where a Financial Needs Analysis with your financial adviser representative comes in. Doing a proper one helps to identify your financial goals, protection needs, risk preference and affordability.
 

Here’s what you should ask your financial adviser representative in order to make a more informed decision on what ILP suits your needs:

  What you should ask Why it's good to know
On premiums

• For how long do I need to pay the premiums?

• What happens to my insurance coverage if I stop my premiums?

• What options do I have if I want to stop my premiums temporarily?

It's important to ensure that you'll be able to afford the monthly or annual premium needed as well as the flexibility to put premiums on hold if ever a crisis occurs. You'll also need to decide how long you're prepared to invest for.
On returns

• Are returns guaranteed?

• What kind of investment risk am I exposed to for my returns?

• Can I lose some or all of my money in this plan?

Knowing your risk appetite, you can then better decide if this matches with it.
On insurance protection

• What type of insurance protection is provided?

• What is the amount and period of coverage?

• Can I change the amount of coverage as my needs change?

• What are the costs involved?

It's important to know if your ILP provides sufficient coverage for you if you're depending on it for the protection element.
On fees and charges

• What are the fees and charges for the plan?

• Where can I find the details of the fees and charges?

It's important to know if your ILP provides sufficient coverage for you if you're depending on it for the protection element.
On surrender and withdrawal

• What are the charges if I want to terminate my plan?

• Can I make partial withdrawals?

• What are the pros and cons when I terminate my plan?

Many people have the idea that they can easily terminate a plan if they change their minds. But in some cases, termination of a plan would also incur huge losses.
On reviewing your plan • What happens if my financial needs or personal circumstances change e.g. retirement or being unemployed? Some ILPs are flexible enough to factor in milestone or lifestyle changes and caterfor them accordingly. If this is important to you, make sure you pick the right plan that offers this feature.
On what's out there

• What are other insurers offering?

• How does your plan compare with other insurers’ plans?

This is about doing your homework and finding out what else is out there. If you have a good financial adviser representative, he'd be able to help identify a suitable plan for you.


We hope you find the information useful! If you any questions, feel free to leave your details in the form below.

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