3 Questions to ask before buying an ILP in Singapore

 

Investment-linked policies(ILPs) are hybrid investment and insurance products. The premium you pay goes towards purchasing you some life insurance coverage and an investment in sub-funds. You may select these sub-funds on your own or get professional help.

An ILP is a really great way to dabble in investments as it offers you potentially higher returns based on the performance of the sub-funds. You also enjoy good flexibility in your choice of sub-funds – you may choose to switch between funds when you please. Plus, a lot of insurers allow you premium holidays, so your plan does not lapse if you can’t make payments for a while.

Overall, an ILP could form quite an important product in your insurance portfolio. If you are planning to invest in an ILP for the first time ever, you could benefit from a bit of guidance. To that effect,here are a few questions to ask your insurer.

 

 

1.     What are the fees associated with maintaining my ILP?

Insurance providers do levy certain fees on their ILPs. These fees are usually charged for administrative services, switching between sub-funds, and managing your funds. These charges can vary between insurers. It is important to note that high fees can potentially reduce the returns you get on the performance of your ILP funds. So, make sure to ask your insurer for a detailed list of all their fees and charges.

2.     What are the premium payment options?

A lot of people aren’t aware of the fact that ILPs come in two main forms – single premium ILPs and regular premium ILPs. You can choose whichever one fits your premium payment capacity. In addition to these options, insurers often allow you to split your payments half yearly as well. As discussed earlier, you can also request for a premium holiday during which you will continue to enjoy life insurance coverage provided that your policy value holds steady.

3.     How much life insurance coverage will I get?

It is important to note that an ILP is not a pure protection product. As such, it may not be able to evolve with your needs for life insurance coverage as you grow older and move closer to wards retirement. It would help to be aware of the coverage you can expect so you can plan the rest of your insurance portfolio. Do also remember that ILPs are quite flexible. You can also consider reducing your insurance coverage portion of the policy and put more towards the investment. This is a great way to potentially increase your returns if you already have a term life insurance or whole life insurance plan in place.

It is advisable to seek the help of a financial consultant if you are investing in ILPs for the very first time.  They will be able to advise you on the policy and sub-funds that are suitable for you as per your investment goals. We hope this article has proved helpful for you. All the best.