An Investment-Linked Policy (ILP) bundles life cover and investing into one product: part of your premium buys insurance, the rest is invested in sub-funds chosen from the insurer's menu. "Buy term and invest the rest" (BTIR) unbundles the same two jobs - a cheap term policy handles the cover, and the premium you save goes into low-cost funds you hold yourself. Both can leave you insured and invested. The difference is what each one costs you to get there, and how much control and clarity you keep along the way.
What it is: ILP: One policy: protection + investment sub-funds; Buy Term + Invest: Two separate things: a term policy + your own investments
Cost structure: ILP: Layered: insurance (mortality) charge, fund management fee, policy/admin charge, plus a premium-allocation effect and a bid-offer spread on units; Buy Term + Invest: Term premium (low) + a fund expense ratio you can choose to minimise
Cost on the invested portion: ILP: Stacked charges, materially higher than a passive ETF, especially in early years (no single official all-in figure exists - read your policy's product highlights sheet and benefit illustration; per MoneySense the bid-offer spread on units is around 5%); Buy Term + Invest: A fund expense ratio of roughly 0.07% to 0.19% p.a. for the broad index ETFs most SG investors use - e.g. CSPX at 0.07% and VWRA at 0.19% (as of 2026, iShares/Vanguard factsheets); the term premium is separate and small
Where early premiums go: ILP: Premium allocation can divert part of early premiums away from investing - MoneySense gives the example that a 20% allocation rate means only S$200 of a S$1,000 premium buys units at the start (as of 2026, MoneySense); Buy Term + Invest: Almost all of the invested money goes to work from day one (minus a small platform/brokerage fee)
Cover for the same budget: ILP: Usually a lower sum assured - the premium is split with the investment side; Buy Term + Invest: Higher sum assured - term is the cheapest way to carry a large death benefit
Transparency: ILP: Multiple stacked charges; the benefit illustration uses non-guaranteed projection rates; Buy Term + Invest: You see the term premium and the fund expense ratio directly - easy to compare
Investment choice: ILP: Limited to the insurer's sub-fund menu (often actively managed); Buy Term + Invest: Open market - any ETF, unit trust, robo-advisor, or index fund
Flexibility to stop / adjust: ILP: Premium holidays may be possible but charges keep being deducted from the fund; partial withdrawals may reduce cover; Buy Term + Invest: Pause or change either piece independently at any time
Surrender / exit in early years: ILP: Surrender charges apply in the early years - can be steep, often a large share of premiums in the first year, so the surrender value can be far below what you paid in; Buy Term + Invest: No surrender penalty - sell units at market value any time (subject to market risk)
Who bears the investment risk: ILP: You - sub-fund returns are not guaranteed; Buy Term + Invest: You - fund returns are not guaranteed
Free-look period: ILP: Yes - a free-look window to cancel for a refund (less any market loss); check the exact number of days stated in your policy documents; Buy Term + Invest: The term policy has a free-look too; the investments you buy yourself are not subject to a free-look
For most people, "buy term and invest the rest" wins on the numbers. Separating the two jobs lets you carry a much larger sum assured for far less premium, while sending the savings into low-cost index funds - where the expense ratio runs roughly 0.07% to 0.19% p.a. for the broad ETFs most SG investors use (CSPX 0.07%, VWRA 0.19%, as of 2026 per iShares/Vanguard factsheets) and almost every dollar is invested from day one. An ILP, by contrast, stacks an insurance charge, a fund management fee, a policy/admin charge, a premium-allocation effect and a roughly 5% bid-offer spread on units (per MoneySense). There is no single official "all-in" ILP cost - it depends on the policy, your age, the sub-funds and how long you hold - so always read the product highlights sheet and benefit illustration before signing. The core problem with bundling is that one product has to serve two masters: the insurance side raises the cost of investing, and the investment side dilutes the cover. ILPs are not a scam, but their fee drag is real and often under-explained, and surrender charges in the early years can be steep (up to around 100% of premiums in year one, per MoneySense). An ILP only makes sense if the bundling is genuinely the thing that gets you to save and insure at all, and you have read every charge with eyes open. If you can commit to a simple term policy plus a monthly ETF contribution, BTIR almost always leaves you better protected and better invested.
An ILP is a life insurance policy where your premium is split: part pays for insurance cover, and the rest buys units in investment sub-funds chosen from the insurer's menu. The policy value rises and falls with the sub-funds, so you carry the investment risk. The insurance (mortality) charge is deducted from the fund and tends to rise as you age, which can erode the investment portion over time.
Two reasons. First, term insurance is the cheapest way to buy a death benefit, so the protection costs less. Second, when you invest the difference in a low-cost index ETF you pay an expense ratio of roughly 0.07% to 0.19% p.a. for the broad funds most SG investors use (CSPX is 0.07% and VWRA is 0.19% as of 2026, per the iShares and Vanguard factsheets), versus an ILP's stacked charges - fund management fee, policy/admin charge, insurance charge, a premium-allocation effect and around a 5% bid-offer spread on units (per MoneySense). Lower fees compound into a meaningfully larger pot over decades.
ILPs are not inherently a scam, but their cost structure is the main drawback. There is no single official 'all-in' ILP cost figure - it depends on the policy, your age, the sub-funds and how long you hold it - but MoneySense sets out the layers: an insurance coverage charge, a fund management fee, a policy/admin charge, a premium-allocation rate (for example, a 20% allocation rate means only S$200 of a S$1,000 premium buys units early on), a bid-offer spread of around 5%, and surrender charges. Because of this, little may be invested in the first few years and surrendering early often returns less than you paid in. Always read the product highlights sheet and benefit illustration, which show guaranteed and non-guaranteed values and the effect of charges, before signing.
You can switch between the insurer's sub-funds, which is convenient. But that flexibility is confined to the insurer's menu, whereas with BTIR you can invest in any ETF, unit trust, or robo-advisor on the open market and change your cover separately. BTIR generally offers more flexibility overall - and at lower cost - even if fund-switching inside an ILP feels seamless.
Losing money. Surrender charges apply in the early years - can be steep, often a large share of premiums in the first year - and because early premiums are partly diverted to charges and allocation, the surrender value in the first several years is often well below the total premiums you have paid. If your circumstances might change, that early surrender risk is a serious consideration. By contrast, with BTIR you can stop a term policy or sell your investments at market value at any time without a surrender penalty (though investment value still moves with the market).
Someone who genuinely would not invest on their own and values the discipline of a single bundled premium, or who has had every charge clearly explained and is comfortable with the trade-off. For most people who can commit to a term policy plus a regular ETF contribution, buying term and investing the rest leaves them better insured and better invested for the same money.