Investment-linked products have surged in popularity as individuals are attracted by the potential of better returns. In such products, the element of life insurance is completely spearated from the investment. A portion of each premium is used to buy life cover and to meet the company's expenses and agent's commissions while the rest is invested in a fund managed by the company or by independent managers.
The primary difference between more traditional products and investment-linked policies is that in the former, the investment risks are borne by the company while in the latter, the risks are passed back to the policy holder. This is very similar to the concept of a unit trust but with a minimal life coverage attached.
The majority of policies available in Singapore are single premium policies where premiums are paid in one lump sum. There are also regular premium policies in which you decide the portion of life coverage that you want, thus varying the investment portion of your policy to suit your needs. Selecting an investment-linked policy is rather like selecting a unit trust. You have to select your asset class(shares, bonds or a combination of both) as well as fund manger.
While it is worth while to pay for skilful investment, this advantage could be eaten up by other charges. The first is the decuction from the premium to pay for the cost of life insurance. The sceond involves paying the insurance company's administrative charges as well as the agents' commissions. The remainder is split into units and an annual mangement charge of between 0.5 and 1.5%. This may be confusing but what ultimately you should ask is how much of your premium is actually invested in the markets to make a fair comparison.
The primary difference between more traditional products and investment-linked policies is that in the former, the investment risks are borne by the company while in the latter, the risks are passed back to the policy holder. This is very similar to the concept of a unit trust but with a minimal life coverage attached.
The majority of policies available in Singapore are single premium policies where premiums are paid in one lump sum. There are also regular premium policies in which you decide the portion of life coverage that you want, thus varying the investment portion of your policy to suit your needs. Selecting an investment-linked policy is rather like selecting a unit trust. You have to select your asset class(shares, bonds or a combination of both) as well as fund manger.
While it is worth while to pay for skilful investment, this advantage could be eaten up by other charges. The first is the decuction from the premium to pay for the cost of life insurance. The sceond involves paying the insurance company's administrative charges as well as the agents' commissions. The remainder is split into units and an annual mangement charge of between 0.5 and 1.5%. This may be confusing but what ultimately you should ask is how much of your premium is actually invested in the markets to make a fair comparison.
