by AIA Singapore
http://www.sias.org.sg/
Many people generally view Investment-Linked Insurance Plans (ILPs) as simply ‘investment’. However few are aware that ILPs also provides insurance protection. In other words, ILPs can help meet your protection and savings or investment needs.
There are broadly two types of ILPs:
Single premium ILPs - Generally provide a lower level of insurance coverage as compared to regular premium ILPs and tend to be more investment focused.
Regular premium ILPs – Allows you to vary the level of insurance coverage to meet your protection needs. You can choose to enhance your protection by adding on additional benefits for disability or critical illness coverage.
If you have just started a family and insurance protection is your priority, you may opt for a regular premium ILP to enjoy a higher protection cover while a smaller portion of your premium is channeled to fund your investments in the initial years.
If you are retiring and have no dependents relying on you for financial support, you may then adjust your policy to provide for a lower protection cover and thus allowing your retirement funds to accumulate faster.
However, do note that investment returns are not guaranteed. It depends on the performance of the investment-linked funds which is not guaranteed and the price of the units can rise or fall.
Here are three quick tips on what you need to know before buying an ILP:
Think long term
Ensure that you have sufficient liquidity before purchasing an ILP because ILPs need a long term investment horizon to potentially grow and accumulate the funds. It is not suitable for you if you are just investing for short term needs.
Use dollar cost averaging
This is a strategy where regular investment is made over specified periods regardless of market conditions. This can help to eliminate a common investment mistake that most investors make of trying to time the market. In the long term, dollar cost averaging can help mitigate the impact of market volatility to your investment.
Know your risk appetite
Performance of the investment in an ILP is not guaranteed and hence the entire risk of the investment value is borne by you. You should know your own risk tolerance level before purchasing an ILP.
Ultimately, ILPs can be a tool for personal protection and wealth creation. Before purchasing one, you should review your financial goals, protection needs and risk profile, among other things. A qualified insurance advisor will be able to advise and recommend you a suitable plan.
http://www.sias.org.sg/
