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.
| ILP | Buy Term + Invest | |
|---|---|---|
| What it is | One policy: protection + investment sub-funds | Two separate things: a term policy + your own investments |
| Cost structure | Layered: insurance (mortality) charge, fund management fee, policy/admin charge, plus a premium-allocation effect and a bid-offer spread on units | Term premium (low) + a fund expense ratio you can choose to minimise |
| Cost on the invested portion | 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%; the sub-fund's own management fee, often around 1% to 2% p.a. on actively managed funds, sits on top of every policy-level charge) | 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 | 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) | Almost all of the invested money goes to work from day one (minus a small platform/brokerage fee) |
| Cover for the same budget | Usually a lower sum assured - the premium is split with the investment side | Higher sum assured - term is the cheapest way to carry a large death benefit |
| Product variant to watch | Comes in protection-focused (higher cover, more goes to insurance charges) and investment-focused (most of the premium invested, thinner cover) forms - the label "ILP" hides very different products, so check which one you are being shown | Cleanly separated: you size the term cover and the investment independently, so there is no hidden tilt between the two |
| Money invested vs money paid in (early years) | Can be less than total premiums paid for roughly the first 3 to 5 years, because front-loaded charges and the premium-allocation effect divert money before it is invested | Effectively all of each contribution is invested from day one, minus a small platform or brokerage fee |
| Transparency | Multiple stacked charges; the benefit illustration uses non-guaranteed projection rates | You see the term premium and the fund expense ratio directly - easy to compare |
| Investment choice | Limited to the insurer's sub-fund menu (often actively managed) | Open market - any ETF, unit trust, robo-advisor, or index fund |
| Flexibility to stop / adjust | Premium holidays may be possible but charges keep being deducted from the fund; partial withdrawals may reduce cover | Pause or change either piece independently at any time |
| Surrender / exit in early years | 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 | No surrender penalty - sell units at market value any time (subject to market risk) |
| Who bears the investment risk | You - sub-fund returns are not guaranteed | You - fund returns are not guaranteed |
| Free-look period | 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 | 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.
Yes. The sub-fund you pick inside an ILP has its own management fee or total expense ratio - often around 1% to 2% p.a. for actively managed funds - and that is deducted on top of every policy-level charge (insurance, fund-administration, policy/admin, the premium-allocation effect and the unit bid-offer spread). So your true all-in cost of investing inside the ILP is the sum of all those layers, which is why it usually dwarfs the roughly 0.07% to 0.19% expense ratio of a broad index ETF (CSPX 0.07%, VWRA 0.19% as of 2026, per the iShares and Vanguard factsheets). Always add up every layer in the product highlights sheet and product summary rather than looking at the headline fund fee alone.
Two effects combine. First, the premium-allocation rate means only part of each early premium buys units - MoneySense gives the example of a 20% allocation rate, where just S$200 of a S$1,000 premium is invested at the start. Second, front-loaded charges and surrender penalties are deducted up front. Together these mean a regular-premium ILP can show a value below your total premiums paid for roughly the first 3 to 5 years, and surrendering in that window typically returns less than you contributed. With buy-term-and-invest there is no such drag - almost every dollar is invested immediately.
Yes, and the difference matters. Broadly, some ILPs are protection-focused (a larger share of the premium pays for insurance, so the death benefit is higher but more of your money goes to mortality charges) and others are investment-focused (most of the premium is invested and the cover is thin). Because both are sold as "ILPs", two policies with the same name can behave very differently. Confirm which type you are being offered, and whether its cover and cost actually match what you need - in many cases a plain term policy plus a separate low-cost fund still does both jobs more cheaply.