5 Terms You Should Be Aware Of Before Buying An Investment Linked Policy In Singapore

 Life starts to look a little more peaceful and better when you have it all figured out financially for the future. Today in recent times, where everything seems uncertain, it is critical that you have got yourself covered for the future. One of the best ways to do that is to invest in investment linked policies. An investment linked policy is a hybrid policy that clubs both life protection and investments into one policy. In this policy, the premiums are used to pay for units in one or more sub-funds of your choice.  A fraction of these units are then sold to buy insurance while the rest of them remain invested. 

The policyholders also have the space to adjust their coverage so as to scale their investment nest egg in the later years. This can come in useful particularly for those who want to reduce their life coverage, especially after their children are no longer financially dependent on them. 


Since there are many variants of investment linked insurance policies, it is imperative to be aware of the policy-related terms. Here’s a detailed description of them:

1. Single Premium vs. Regular Premiums

There are two ways by which you can pay the premiums for ILPs. You can pay for them through regular premiums or through a single premium. For those who opt to pay a single premium, it implies paying a lump-sum at the start of the policy and part of it will go in purchasing units in a sub-fund (i.e. the investment component). These units will be sold on a regular basis to pay for any coverage (basis the extent of life coverage you choose or the policy provides).

 In case of regular premiums you can choose to pay the premiums on a monthly or annual basis and the premiums paid are then broken into the components of protection and investment. 

2. Premium Holiday

In case of regular premiums, you may have the option to increase or decrease the extent of your coverage or you can get the units to be sold for your protection level. This may give you the flexibility to take premium holidays (i.e. a period of time for which you don’t have to pay the premiums on the policy). 


In the event of a financial difficulty, you can stop making the payments of your premium. This feature is known as premium holiday and can be useful if you are switching jobs or need funds for a more pressing financial commitment. During a premium holiday, the existing units are used to pay for the cost of insurance along with any other fee that may be involved for the maintenance of the policy. 

It is important to note that there may be charges applied and you should check with your insurance provider. 

3. Sub-funds

The investment plan you opt for gives you access to a diverse range of sub-funds, hence opening the doorways for you to diversify your investment. Here you get exposure across a wide range of asset categories like fixed interest bonds, equity, property, commodity, and money market. These sub-funds, on an individual level may also be region-specific and sector-specific. It is however critical to keep in mind that you choose the kind of funds that are in line with your ability and your appetite to take on risks. 


Original Source : 5 Terms You Should Be Aware Of Before Buying An Investment Linked Policy In Singapore



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