Why Buy Through MoneySmart?Investment-Linked Policies (ILPs) are insurance products in Singapore that combine life insurance protection with an investment component in a single plan.
This means you get coverage (such as for death or total and permanent disability) while also having part of your premium invested—offering you a chance at wealth growth and protection at the same time.
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Here’s how they work and the main features of ILPs in Singapore:
How ILPs work: Your premiums are used to buy units in sub-funds you select from the insurer’s fund menu. Some units are automatically sold to pay for insurance charges, while the remaining units stay invested.
The value of your ILP is based on the number and price of these fund units, which can go up or down.
No guaranteed returns: Unlike traditional whole life or endowment insurance, ILPs typically do not promise guaranteed cash values or maturity benefits. Investment outcomes depend entirely on your chosen funds’ market performance.
You bear full investment risk: Because policy values fluctuate with the underlying funds, you could see your ILP’s value fall—or even face losses—especially if the markets underperform.
ILPs are suitable for those who accept investment risk for higher return potential.
Flexible protection benefits: Most ILPs include life insurance that pays out upon death and may offer total and permanent disability (TPD) or terminal illness cover as well. Riders for critical illness are often available as add-ons, letting you tailor the policy to your needs.
Charges can increase over time: Insurance charges within an ILP typically rise as you get older.
If your investment doesn’t perform well, your policy’s value may become insufficient to cover these charges, possibly requiring you to top up your premiums or face reduced coverage or early policy lapse.
Long-term commitment: ILPs are built for long-term financial goals—staying invested for many years is usually necessary to ride out market ups and downs. You’ll typically have a choice of funds with different risk levels, so aligning your selections with your risk appetite and investment horizon is essential.
Key takeaways for choosing an ILP
Good for those who want a product that covers both insurance protection and investment potential.
Best for people comfortable with short-term market ups and downs in exchange for possibly greater long-term returns.
You’ll need to be prepared to actively select and monitor your investment funds, or review your allocations regularly.
Before signing up for an ILP, consider if you’d prefer standalone life protection, pure investments (like unit trusts or ETFs), or a combination product like an ILP. Choose a structure that matches your risk tolerance and financial aims.
Speak with our financial advisory team to get more in-depth guidance about ILPs and traditional life insurance policies available on the market.
