We know that Investment and Financial Risk mitigation are two important elements of Financial Planning. Hence, by combining Investment and Insurance into an Investment Linked Policy (ILP) seems to be an ultimate solution. We believe that almost every one of us have at least one ILP. We have been asked very often and I think will be helpful if we put it into a written form for the reference of the public. Hence, we are going to discuss in details a few important elements and features of Investment Linked Policy in this session. Note that some insurers (insurance companies) name Investment Linked Policy as Unit Linked Policy. Both refer to the same type of Insurance Policy. Please note that these features are similar for Investment Linked Certificate for Takaful.
A few important elements and features of Investment Linked Policy will be discussed in this post. Note that some insurers (insurance companies) name Investment Linked Policy as Unit Linked Policy. Both refer to the same type of Insurance Policy. Please note that these features are similar for Investment Linked Certificate for Takaful.
This is the list of subtopics we will discuss in this post. You can start from item 4 if you already knew what is an Investment Linked Insurance Policy.
- All in One (Package)
- What you must know?!
Remember many years ago, information was not easily obtained, everyone told everyone that insurance premiums for insurance products are almost the same even if it is from different companies. In fact, even today, life insurance information is still relatively not easy to obtain.
What we were normally told?
- All insurance products were approved by Bank Negara Malaysia, therefore, the price will be almost the same.
- As insurance risk is based on the country population and data from Government, the price will be almost the same.
- Those Actuaries who responsible for product pricing is from the same pool of people, therefore, the prices are very near to each other.
However, although we don’t know how they actually structure the price for insurance products and it will not be our matter of discussion for today. What we would like to highlight here is the comparison of a product from 2 major companies in Malaysia, and it might surprise you that the price is differs by approximately 60%.
We have recently conducted product features and pricing comparisons after the new regulations by Bank Negara Malaysia on Minimum Allocation Rate (MAR) and Policy Sustainability requirements on Investment Linked Products. The comparison was done with the nearest comparable features from different companies with same profile of client, same coverage and same number of year of sustainability. (Up to age 80)
As a summary, we found no evidence of significant increase in Cost of Insurance, premiums or other charges besides the Surrender Charges if you choose to surrender the policies within the first two years.
If you would like to construct a insurance plan for yourself from an Independent Financial Adviser, feel free to contact us.
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