5 Reasons for Investment-Linked Insurance

Do you know why the first-timer should go for investment-linked insurance? Very often, we are presented with Investment-linked insurance policy by the agent. Some say investment-linked insurance is not insurance anymore and it does not protect you, and some say it is always advisable to go for traditional insurance. In fact, it is advisable to buy an investment-linked insurance. There are 5 Reasons for Investment-Linked Insurance. But first, let me explain to you what are the differences between traditional and investment-linked insurance.

Traditional versus Investment-Linked Insurance Policy

1. Protection

Traditional Policy:

The protection will be increased over a certain period of time, subject to what company and what product you sign up as long as you keep paying the premium that has been agreed in the policy.

Investment-Linked Policy:

The protection will remain fixed. The range of protection varies depending on the products offered. The protection can adjust if you request for amendments.

2. Insurance Charges

Traditional Policy:

The policy charges the premium on average. That is what we normally call it – level premium.

Investment-Linked Policy:

The policy charges will increase over time. Hence, it is advisable to take investment-linked policy as early as possible as it is cheap when you are younger. That is what we normally call it – natural premium.

3. Return

Traditional Policy:

The bonus is vested on a yearly basis. Once the amount of bonus is declared, it will not be taken away from your policy regardless of market performance.

Investment-Linked Policy:

Bonus varies with market performance. You may get a bonus when the invested fund is performing well. But the bonus will be taken away when the market is doing badly.

5 Reasons for Investment-Linked Insurance

Now you know the main differences between the traditional and investment-linked insurance, but how to the determine which insurance to go for? For first timer, I suggest them to go for investment-linked insurance. Let me tell you why.

1. Flexibility

It allows you to adjust the premium as we require different protections over time. We need less protection when we are retired and our kids are independent. Conversely, we need more protection when we are just married and forming our own families. It also allows us to choose coverage rider and sum assured.

2. Investment

Although the investment-linked policy is risky, it allows us to manage a the risk of our investment. Similarly to unit trust, we can analyze the risk index and choose the fund that we are comfortable with before we make our investment. Furthermore, it allows us to switch funds.

3. Insurance Charges

It is ideal for fresh graduates who age from 21 – 25 year old. Investment-linked insurance charges are normally lower when you start at younger age. The charges are normally estimated based on mortality table and you can engage high coverage with low premium when you are younger.

4. Transparency

5 Reasons for Investment-Linked Insurance

Comparing to traditional policy, investment-link policies are more transparent and tabulate all premium allocation. On monthly/quarterly/yearly basis, you will receive statements from insurance companies that will state all the premium allocation, insurance charges, fund unit price and market value. You can always write to the insurance companies if you wish to see the performance report whenever you want.

5. Benefits

All coverages can be integrated into the investment-linked policy, which includes hospitalization income benefits, living assurance and critical illness benefits etc,. I personally find it convenient to have one insurance plan that integrates all these benefits.

5 Reasons for Investment-Linked Insurance

Add-on: Health Insurance Card

Some insurance companies provide better hospitalization and surgical benefits. This has to be check with different insurance companies that are available around you.

Thanks for reading this post.
Regards,
Alex

NOTE: Above post is written based on the available insurance products and services in Singapore/Malaysia. It may not be applicable to other countries.

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14 Responses

  1. Stephane says:

    Thanks for the great information Alex! You definitely made the concept of investment-linked insurance clearer for me. Cheers!

    • Alex Y says:

      Thank you for reading the post! I am glad to hear that this article makes things easier for you to learn a bit about insurance.

      Regards,
      Alex

  2. Manuel says:

    Hi Alexy,

    This is a very useful and informative article. There are so many different websites out there that are writing about insurances, but you never know if they are trustworthy or scams. I have a good feeling with you as the information is good and useful.

    I agree partly when you say that it is good to go for investment-linked insurances at the beginning because I see more sense to go the traditional way. What would you suggest for advanced people?

    Cheers
    Manuel

    • Alex Y says:

      Hello Manuel,
      I am happy to hear that you find this article useful and informative. At the time of writing, I did some research and found a lot of worth-a-read website about insurance. I do hope this is applicable to you as I have mainly focus on the products that are available in Singapore and Malaysia.

      For advanced people, I do suggest to take both traditional and investment-linked insurance policy. There are pros and cons for each of them. Simply put, I normally recommend younger people to go for investment-linked policy while the elder to go for traditional type. It is of course okay if one has the capacity to engage investment-linked policy, it is just slightly expensive, but at least you control the investment based on your risk portfolio.

      Hope this helps!

      Regards,
      Alex

  3. Bob says:

    Hello Alex, great information you have here and nice site too. I have been thinking about this for a while now. This will definitely help make a decision.

    Thanks and have a great day!
    Bob

  4. tim says:

    a good concise article here, plenty of good arguments in favour of investment linked policies, food for thought thankyou

  5. Martin says:

    Hey there!

    Never even heard about this 🙂

    Great to read some easy understandable information about it!

    Keep up the good work!

  6. IraR says:

    Alex,

    This is a great post. It’s informative and I have definitely learned a ton here today. I look forward to reading more of your posts in the future.

    IraR

  7. jo says:

    Hi interesting post, informative and has some good advice about insurance policy’s.

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