Choosing the right insurance plan for you will not only cover the entirety of your life and your dependent’s life but there are many types of insurance plans that link and combine other benefits as well. To further elaborate on this matter, let’s go ahead and understand what a single premium investment-linked insurance plan Malaysia is all about.
What is an investment-linked plan in general?
An investment-linked plan is an insurance AND an investment, linked together, where you will get the chance to enjoy benefits such as possible returns of the investment you made in various investment funds, as well as the insurance protection for unexpected situations or challenges.
Insurance, as we know it, covers unexpected threats, or challenges that are unforeseen in the near future. With insurance, you will be covered from spending or paying a total amount of the damage (or hospital bills). Moreover, your dependents too will be covered if the unexpected happens to you.
Investment-linked plan, on the other hand, allows you to withdraw some value from your account to be used to cover or maintain your financial needs; all this on top of the payout given to your dependents (if any) if anything unexpected happens to you.
So, the investment-linked plan is 50/50?
In a way, it is. Part of the portion from the investment-linked plan will be saved up for insurance protection, and the other portion of the plan will be invested in investment funds. From the name of the plan itself, it is obvious and understandable that this insurance plan does not cover life insurance only. Kind of like, double the benefits, but bear in mind, it can be risky too with the lack of research and guidance in choosing which one suits you the most.
Are they many types of ILP to choose from?
ILP (investment-linked plans) are classified into two categories, so no, there are not many types of ILP to choose from. However, do bear in mind that choosing ILP itself requires a lot of consideration, so having two categories to choose from seems efficient enough.
The two types of ILPs are these:
- Single premium ILPs
- Regular premium ILPs
Any differences between the two categories? Yes. The differences are as follows:
- Single premium investment-linked plans mean you pay a lump sum premium to buy units in a sub-fund. What this means is, that you pay the full amount of the premium to buy the units for your investment, and It is said that most single premium ILPs provide lower insurance protection.
- Regular premium investment-linked plans mean you pay premiums on a regular basis (or in other words, on an ongoing basis). Compared to the single premium ILPs, you have the flexibility to vary the level of insurance coverage that you needed.
Since ILPs are a linked plan, what are the risks that I need to be aware of?
One thing about ILPs that you need to bear in mind is since it is an investment-linked plan, sometimes when you are investing in funds, the return value might not consistent or guaranteed. For ILPs, that is one of the risks you need to face as the value of an ILP fully depends on how the sub-funds perform.
Another risk or challenge that you will have to keep in mind is the insurance coverage charges. As we know, insurance charges rise with age. Hence, it is also why most people will recommend young people to get an insurance plan when they’re younger because it’s cheaper. So, with regular premium ILPs, there may also be an increase in the cost of insurance coverage. Therefore, another reason why you need a lot of consideration when opting for ILP.
Hence, do bear in mind this:
- Those with a longer investment range can opt for ILPs
- Different ILPs have different insurance coverage
- Take time to consider if you are able to keep up with the premiums
- Do comparisons of ILP with other investment products