Insurance product where premiums buy units in investment funds, with a chunk siphoned off to pay for life cover. Front-loaded fees mean early surrenders are costly.
An Investment-Linked Policy combines life insurance with investment fund exposure. Each premium buys units in your chosen sub-funds (the investment side) and pays for the cost of insurance (the protection side).
ILPs are sold by all major life insurers in Singapore — AIA, Great Eastern, Manulife, Prudential, Singlife, Income, FWD. They're commonly pitched as combining wealth accumulation with protection in one product.
Year 1 – 3: front-loaded allocation. A large portion (often 30% – 100% of premiums in year 1) goes to commissions, distribution charges, and policy fees. Only the residual buys units.
Year 4+: allocation typically rises to 100% — premiums fully buy units, minus a small ongoing admin charge.
Cost of insurance: deducted monthly from your unit value, scaling with age. By 60+, this drag can consume a large share of the fund's return.
Total ongoing fees: typically 2% – 3% per year including fund expense ratios, admin charges, and mortality charges. ETFs cost 0.10% – 0.30%.
Surrender penalties: if you exit in the first 10 – 15 years, you typically lose a significant chunk of premiums paid.
Fund universe: ILP sub-funds are insurer-curated and rarely include the lowest-cost global ETFs. Performance often trails simple index investing.
Insurance dimension: bundled insurance is more expensive than buying term separately. The 'value' of the protection rarely justifies the wrapper.
Forced savings habit: if you'd otherwise spend the money, an ILP's lock-in can be a behavioural commitment device. The cost is real though — usually 1% – 2% of returns annually.
Single-premium ILPs: lump-sum products with lower ongoing fees can occasionally compete with retail unit trusts for accumulation, especially if you don't need the insurance.
Generally: most independent financial planners recommend term + low-cost ETFs over an ILP. The 'buy term and invest the difference' rule applies strongly in Singapore's high-commission environment.
A life insurance product that bundles death cover with investment in sub-funds. Each premium buys units, with a chunk siphoned off to fund the cost of insurance and management fees. ILPs are widely sold in Singapore but heavily front-loaded with commissions in early years.
Usually not vs. 'buy term and invest the difference'. Total ongoing fees on ILPs typically run 2% – 3%/year; passive ETFs cost 0.10% – 0.30%. Over 30 years that fee differential can eat 30%+ of final wealth. ILPs work mainly as forced-savings vehicles for those who lack the discipline to invest separately.
Steep in years 1 – 10. Allocation in year 1 may be as low as 15% – 60% (the rest funds commissions, fees), and surrender values usually reflect only the unit balance at the time. Early surrender locks in a guaranteed loss.
Run the math. If you're past the heavy front-loaded years, ongoing fees may be more bearable, but compare against pure term + ETF for the same coverage. Many planners advise paid-up status (stop paying premiums, let the policy run on its cash value) if surrender would lock in a major loss.