4 Features to Look for in an ILP
You might have come across the option of ILPs when building your investment portfolio. ILP stands for ‘investment-linked plan’ and is a hybrid insurance and investment product. Part of the premiums that you pay are put towards investments in the insurer’s suite of funds. Depending on the performance of the funds, you have the potential of growing your savings through an ILP. An ILP can serve to be an interesting addition to your existing investments. You may want to opt for an ILP to save up for a particular life goal (such as going on a world tour a couple of years down the line) or simply to build up a corpus of funds for retirement. A part of your premiums goes towards buying life insurance coverage. This life insurance component of the plan provides coverage against death, terminal illness, and total permanent disability. Now, if you are planning on taking an investment-linked plan for the first time, you may need a bit of guidance. To get you started on the right track, we have listed down 4 features that you should seek in an ILP.
Feature 1 – Flexibility for both coverage and savings You may want to start by looking for an insurer who offers good flexibility in their ILP. A good ILP should offer you the opportunity to adjust your life insurance coverage as per your requirements. This way, your ILP keeps up with your life plans. If you reach an age where you feel you want to lower your life insurance component of the ILP as you feel sufficiently protected from another life insurance plan, you should be able to do so. You should also ideally be able to make lump sum or regular top-ups and even carry out partial withdrawals.
Feature 2 – Wide choice of added benefits Since an ILP has a life insurance component, it should ideally also come along with a choice of riders. Look for riders that offer multiplied coverage, additional lump sum payout upon diagnosis of a critical illness, or a payout if you meet with an accident that affects major organs. Such benefits can provide us with some assurance for sudden unfortunate situations that we sometimes encounter in life.
Feature 3 – Guaranteed coverage Some of the best ILPs in Singapore give you guaranteed coverage for a certain number of years. This way, you have true peace of mind knowing you stay secured against a market that can sometimes be quite volatile. Do note that this benefit might be subjected to certain terms. For instance, this benefit is only applicable if you have not made any withdrawals and paid all your premiums regularly.
Feature 4 – Adjust coverage without underwriting Choose an ILP that does not require any underwriting when you adjust your coverage. This way, your investment-linked plan can keep up with your evolving life goals. Some of the best insurance providers even allow you to reduce your coverage once your plan completes a certain number of years (usually around 10 years) or once you reach a certain age (usually around 50 years). Keep these 4 features in mind while finding a suitable ILP for your investment goals. We do also recommend that you speak with a financial consultant prior to taking any important decisions with your money. We hope that this article will prove helpful when you explore investment-linked plan options here in Singapore. All the best!
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