How can you insure and invest at the same time?

Yes, it is possible! As our pro-tips suggest, you could explore an investment-linked plan (ILP) as one possible solution so that you have the freedom to choose how you want to achieve your financial goals. An ILP is an insurance product that provides both a life insurance and investment component. Here are some of the key features of ILPs:

  • Effectively combines insurance coverage and investments in one plan
  • Customisable to your needs. You can choose the level of coverage you desire as well as a range of funds that compliment your investment objectives
  • Offers great flexibility and ability to switch things up as your life path changes

 

Firstly, what are ILPs?

Investment-linked insurance plans (ILPs) provide life insurance coverage in the event of:

  • Death
  • Total permanent disability (only if applicable)
  • Terminal illness (only if applicable)
  • Critical illness (only if applicable)

 


How does it work?

The premiums paid will be invested in ILP sub-funds of your choice that suit your risk appetite and investment objectives.


A portion of the premiums are deducted to provide insurance coverage and policy administration fee. The remaining sum will then be used to invest in the ILP sub-funds.


 

Two uses of ILPs:

  • Protection focused: The primary focus of such ILPs are to provide you with essential protection against death, total and permanent disability, terminal illness and critical illnesses. It provides flexibility to increase or decrease your protection coverage anytime based on your needs and accumulate wealth at the same time. You may also make additional contributions to the plan to accelerate your wealth accumulation goals.

  • Wealth accumulation focused: In contrast from the protection focused ILPs, wealth accumulation focused ILPs help you to grow your wealth over a medium to long term horizon and provide minimal insurance coverage. The primary goal is to help you save and grow your wealth by taking on appropriate level of risk based on your risk appetite. There is flexibility to make additional contributions as well as withdrawals when needed.

You should consider an ILP if:

  • You want all in one convenience for your protection and wealth accumulation needs with an affordable plan
    You want the option to change things as and when your plans change. An ILP gives you the ability to modify your insurance plan according to your needs throughout your life. This could mean changing your life insurance coverage, toping up additional premium to boost your investments, making partial withdrawals to fund life milestones or even switching funds as your risk appetite or time horizon change.
    For example, increasing insurance coverage as your responsibilities increase such as purchase of a new house, getting married, having a baby etc. Or make top ups to your plan as and when you have spare cash.

  • You are looking to grow your wealth
    As mentioned earlier, ILPs invest part of your premiums into ILP sub-funds. The ILP sub-funds invest in various type of assets such as equities, bonds, real estate, commodities etc depending on the chosen fund based on your investment objective and risk appetite. Hence, it may generate potentially higher returns over a long term horizon.

  • You are happy to have more control of how your money is invested
    You have control on how your money is invested as the investment strategy of an ILP is determined by your selection of the ILP sub-funds. There is a range of ILP sub-funds to select from and your portfolio can be customised to your investment objectives and risk appetite. It is important that you carefully assess the potential risk and returns associated to each sub-fund before selecting.

  • You have a long-term time horizon
    ILPs are suited for individuals with long term time horizons. Having a long-term horizon will help in riding out the highs and lows of market cycles At the same time, longer time horizon will even out the upfront cost paid in the first few year you purchase an ILP.

Do note that Investment products are subject to investment risks including the possible loss of the principal amount invested. The performance of the ILP sub-fund(s) is not guaranteed and the value of the units and the income accruing to the units (if any) may fall or rise. Past performance is not necessarily indicative of future performance.


Last but not least

It is important to take on ownership to monitor your plans periodically. Review your needs regularly as your life stage changes.


Coupled with the guidance from our financial consultants to make any adjustments to your plan if necessary – so that it is keeping up with your changing needs.


Consider PRUActive LinkGuard, an affordable protection-focused ILP for individuals looking for a flexible way to make the most out of finances. The plan is designed to be flexible so you can adjust coverage and investment based on your changing priorities as you progress through life.


With PRUActive LinkGuard, enjoy the assurance of double protection, while powering the financial freedom to chase your dreams at every stage in life.


Regardless of which life stage you are at, feel the freedom to pursue passions and goals, and continue to DO it all.


 

Other ILP plans which you can consider:


To find out more, contact a Prudential Financial Consultant today.


These policies are protected under the Policy Owners’ Protection Scheme which is administered by the Singapore Deposit Insurance Corporation (SDIC). Coverage for your policy is automatic and no further action is required from you. For more information on the types of benefits that are covered under the scheme as well as the limits of coverage, where applicable, please contact your insurer or visit the GIA/LIA or SDIC web-sites (www.gia.org.sg or www.lia.org.sg or www.sdic.org.sg).


Information is correct as at 24 March 2021.


Sources:


1https://www.straitstimes.com/business/why-investment-linked-insurance-policies-should-be-given-a-chance, The Straits Times.

2https://blog.moneysmart.sg/life-insurance/ilp-insurance-investment-linked-policy/, MoneySmart.
3https://www.investopedia.com/terms/s/subadvisedfund.asp, Investopedias.

 

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