A Quick Guide To Understanding ILPs In Singapore

 


When exploring options for life insurance in Singapore, you might have come across ‘investment linked policies’ or ILPs. Have you ever wondered what these are or how they can prove to be a useful addition to your insurance portfolio? If yes, then this article is just for you! Read on to discover how ILPs work and what advantages they can possibly offer you.

How does an investment-linked policy work?

An investment linked policy is an insurance product that has two main components – life insurance (protection) and investment. The premium that you put towards the ILP is used to invest in sub-funds. Units of these sub-funds are then sold to buy insurance and pay for other associated costs that the insurer charges you. 

ILPs are divided into two main types –

·         Single premium ILP – True to its name, you pay a single, lump sum premium.

·         Regular premium ILP – You pay regular premiums that are put towards your investment and insurance

Insurers generally allow you to make adjustments to the insurance and investment components of your ILP as your priorities change in life, subject to terms and conditions.

 

ILPs can be enhanced with riders

Just like other insurance products, ILPs too can be enhanced with riders to increase the protection component of the plan. You can boost your coverage by opting in for riders that provides a payout upon diagnosis of a critical illness or even an accident that affects the major organs. 

What are the advantages of an ILP?

An ILP can hold the following advantages for you –

·         The potential for returns is can be high

·         You can increase the insurance component without underwriting and even decrease it to zero after a certain age

·         You can make partial withdrawals when in need

·         You get access to expert-managed funds



Tips to keep in mind

If you are new to ILPs, the following tips might prove helpful for you –

·         Evaluate the long-term affordability of the premiums, especially if the payout period will stretch into your retirement years

·         Ask the insurer to provide you with full details of all the fees you will be charged

·         Speak to a financial consultant if you need help and guidance in making an informed decision

 

What are the other alternatives for life insurance?

If it is purely life insurance that you seek, you can consider opting for either –

Ø  Whole life insurance – Whole life insurance covers you for the entirety of your life against death, terminal illness, total permanent disability, and critical illness. 

Ø  Term life insurance – A term plan covers you for a period that has been selected by you against death, terminal illness, and total permanent disability.

It is advisable to keep pure life insurance coverage active along with your ILP for increased protection.

Hope that this quick guide will prove useful when you are considering  an investment linked policy in Singapore. You can always seek the help of a professional financial consultant for guidance specific to your needs and expectations.

Take care. 

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