If you’ve dipped your toes enough in the insurance scene or have conversed with friends and financial advisors, you’d probably have heard of different opinions on investment-linked policies.
While its payouts might sound lucrative, there’s another camp that strongly believes that mixing your life coverage and investment policies might be recipe for disaster.
With the wide range of policies available out there, it is always a good idea to do your due diligence and take a quick read on what features you should look out for in different policies, so you can grasp a better idea of which are the most suitable for you.
What to look out for when purchasing Investment-Focused ILPs?
There are 2 types of ILPs – single premium ILPs and regular premium ILPs. While most opt for a regular premium ILP which allows them to make monthly or annual payments throughout the policy term, you can also opt for a lump sum payment with single premium ILPs.
With regular premium ILPs, there are minimum premiums to be paid. Depending on your policy of choice and your total investment term, your premiums may vary. Across different policies, the lowest premium you can get is a monthly payment of $200 and can range up to about $750 or more.
Most policies also allow you to increase your premiums, should you decide you want to. However, there is a minimum increment amount stipulated by the insurance company as well.
Failing to meet the payment punctually may result in you being excluded from future bonuses or additional fees.
Minimum Investment Periods
Due to the nature of these investments, most policies implement a minimum commitment period of 5 years, spanning to 25 years. However, there are some policies such as the Manulife InvestReady Wealth II which has a shorter commitment period of only 3 years.
As such, to ensure you can receive substantial returns from your ILP, you need to be confident that you can commit throughout the full period.
If you wish to extend your policy term, most plans allow you to do so as well. However, do note that most payment terms have an interval of 5 years – meaning to say, you will not be able to extend your policy by anything less than that.
Availability of Riders
Apart from the basic coverage you will receive from your plan, there are also options to purchase riders for your policy. Of course, that also means you will have to pay more for these additional benefits.
Depending on the company and flexibility of the plan, there are different types of riders being offered. Some of the most common ones include riders for cancer waiver, critical illnesses waiver, and payor benefit.
For a quick understanding, cancer and critical illnesses waivers will either pause or waive any remaining premiums for you to enable you to focus on treatment and recuperation.
In the event where you pass away or are permanently disabled, the payor benefit will pay for the premiums of your loved ones as well. As this is a general guideline, specific terms and conditions also vary for different policies.
Death & TPD definitions
When getting covered by ILPs, death is the most common basic coverage you will receive from your policies. However, the claims might vary more strictly or broadly according to different policies. Some key factors to note when looking out for these terms are:
- Whether the death was caused by an accident
- Whether the person insured passes away within a stipulated period from accident date
- Age of passing of person insured
In some cases, there are also policies also allow for total and permanent disability (TPD) coverage, categorised into 2 different types of TPD – presumptive TPD and non-presumptive TPD.
The former refers to total loss of sight in one or both eyes, or loss of one or two limbs. Non-presumptive TPD, on the other hand, refers to a disability that leaves the policyholder incapable of working for income.
Depending on what types of life coverage you are looking for, this segment may be something to look into.
With the assumption that you will be committing to your plan without any changes made, you will only be incurring compulsory fees from your policy. With the varying types of compulsory fees, this is something to consider and compare before committing to a plan.
Typically, the compulsory fees may include two or more of the following, and will decrease after about a decade of committing to your plan:
- Fund Management – depending on type of funds chosen, can be up to 1.75% per annum
- Initial Charge – fees payable for starting your account and establishing your policy
- Policy Charge – fees payable for maintaining your policy
If the policy invests directly into the funds, the fund management fees are already calculated in the returns you see and you will only incur the initial & policy charges.
Should the insurance company invests through its own funds, you will be charged an additional layer of fee – the fund management fee. This will be covered in the later section.
Now, you may be wondering – why do I have to pay compulsory fees for ILPs when I can directly invest into funds yourself?
The most direct answer for this lies with the credibility and convenience an insurance company brings for you.
And because insurance companies have the team and capability to invest in large amounts, they get access to funds that retail investors do not have access to.
Such funds are usually aggressive with higher potential returns that will be balanced with other funds to manage your risks – allowing you to get higher returns for the risks you take.
Investing into Company’s Sub-Funds VS Directly into Sub-Funds
When talking about funds, it’s important to note if you’re investing via the insurer’s sub-funds or directly into them. This will make a difference in the returns that you see from your policy.
The good thing company sub-funds are also normally managed by a team or firm apart from where the units are being held. For example, an insurance company partners with Blackrock – a world-renowned asset management company.
With the credibility of these professional firms who also handle global clients, it perhaps gives you greater ease of mind knowing your money is in the hands of fund managers who are experienced in the industry.
However, the downside to this is that you’re paying an additional layer of fund management fees with no guarantee of making higher returns than investing directly into the sub-funds.
These fees can go up to an additional 1.75% per annum that you have to pay for.
Savvy retail investors usually recommend purchasing directly into sub-funds if you’re investing in unit trusts just because of the additional costs that are not worth it.
Premium holidays are periods when you can choose to temporarily stop paying from your premiums, so long as your account has sufficient value to do so. While this sounds like a flexible option, there are some conditions to look out for:
- The minimum required number of years you must have continuously and punctually paid for your premiums
- Whether there is a premium holiday charge
- Whether your riders are affected during your premium holiday
Throughout the term of your policy, you will be rewarded with a couple of bonuses to incentivise you for your commitment to the plan.
The main bonuses you will receive are initial bonuses (also called welcome bonus, or first-year bonus), as well as loyalty bonuses after you have committed to the plan for a minimum number of years.
The returns you receive will be based on your commitment period, as well as the performance of the funds you choose to invest in.
Depending on your risk appetite and how much capital you have, you can choose from low to high-risk rating funds. Optimally, it will be good to have a mix of both high and low-risk funds to balance your portfolio well.
Additionally, it will also be good to do a little research on the funds that you are interested in to get a better idea of how they might perform over time, and if the companies might be affected by volatile development of events.
However, it is also important to understand that as ILPs, like all other investments, are ultimately reliant on market movements, you are not guaranteed high returns, or possibly even the amount you initially invested.
To reap the full benefits of returns, you are advised to commit till your plan fully matures after a couple of decades.
Some policies allow the flexibility of switching funds, should you decide you want to allocate your units in other portfolios. While some companies allow you to do this without cost, there are some policies that require you to pay a small fee for fund switching.
It is also good to find out if your policy allows for withdrawals. There are 2 types of withdrawals – partial and general withdrawals.
A partial withdrawal can be done upon request and allows you to receive a one-time payout. General withdrawals, on the other hand, is a stipulated withdrawal that you can perform at certain intervals of the year (e.g. yearly, half-yearly, monthly, etc). Do note that there might be charges for withdrawals.
A Bird’s Eye View
|Minimum Premiums (Per Month)||Minimum Commitment Period (Years)||Compulsory Fees||Coverage|
|AIA Pro Achiever||$200||12||
|Prudential PRUSelect Vantage||$750||5 to 25||
||Accidental Death, Death from non-accidental causes|
|TM GoClassic||$630||5 to 25||
||Basic Death, Advanced Death (occurs during premium payment)|
|AXA Pulsar||$300||5 to 30||
||Death, Life Replacement (if you wish for your spouse/child to take over your policy)|
|Manulife InvestReady Wealth II||$200||3 to 20||
||Death, Terminal Illness|
|Great Eastern GREAT Wealth Advantage||$200||10||
||Death, Total and Permanent Disability, Terminal Illness|
|#goTreasures||$500||10 to 30||
||Basic Death, Advanced Death (occurs during premium payment)|
Best ILP in Singapore
Now that you have gotten a birds-eye view of some key terms and factors to look out for when choosing an ILP, the best way to pick a suitable one is to know what you want to take away from this plan – whether it is high returns, flexibility to add-on for greater coverage, etc.
Manulife InvestReady Wealth II
Personally, we think that the best ILP in Singapore is the Manulife InvestReady Wealth II. This is due to low fees, direct investments into the funds, riders offered, and the ability to receive dividends.
Although it may not be the best for each of the following categories, we feel that it is well-balanced between the returns, fees, and flexibility it offers.
Best ILP with the Highest Potential Returns
Tokio Marine TM GoClassic & Tokio Marine #goTreasures
The reason for this is due to the access to aggressive funds that were only available to accredited investors.
This means the returns from these funds are usually higher than what the average retail investor can access.
However, the downside to these ILPs is the high compulsory fees it comes with. These fees are usually offset by the bonuses offered but unless you’re able to stay invested for long periods of time under these ILPs, they can significantly reduce your returns.
Best ILP with the Lowest Fees
For those who are looking at ILPs which incur the lowest compulsory fees, the main policy that charges the least is the Manulife InvestReady Wealth II.
Manulife InvestReady Wealth II
As you can see from the above table, this policy charges you 2.5% per annum for the first 10 years, and then it drops to 0.7% after. Since investing is a long-term game, this might be something you should consider if you keep your returns as a constant.
Best ILP with the Most Flexibility
If you’re looking at a plan which gives you greater flexibility, you’d want to look at the riders available, whether they allow fund switching easily, and if they allow premium holidays and partial withdrawals.
Some plans which are known for their flexibility are Tokio Marine’s #goTreasures and GoClassic, Manulife InvestReady Wealth II, and AXA Pulsar
|Riders Available||Is Fund Switching Allowed
|Premium Holidays||Partial Withdrawals||Are Top-Up Premiums Allowed?||Varying Regular Premiums|
|AIA Pro Achiever||
||Yes||Yes (no charge)||Yes (with charges)||Yes||Yes (Decrease only, not increase)|
|Prudential PRUSelect Vantage||
||Yes||Not Stated||Yes (no charges)||No||Yes (decrease only)|
||Yes||Yes (no charge)||Yes (no charges)||Yes||Yes (both increase and decrease)|
|AXA Pulsar||Not Stated||Yes||Yes (no charge)||Yes (no charges)||Yes||Yes (only decrease)|
|Manulife InvestReady Wealth II||
||Yes||Not Stated||Yes (with charges)||Yes||Yes (increase and decrease)|
|Great Eastern GREAT Wealth Advantage||Not Stated||Yes (no charges)||Yes (no charge after 10 years)||Yes (no charges after 10 years)||Yes||Yes (decrease)|
|#goTreasures||Not Stated||Yes||Yes (no charges)||Yes (no charges)||Yes||Yes (decrease only)|
Tokio Marine #goTreasures
However, if we’d have to select just one policy, we’d have to select Tokio Marine’s #goTreasures because of the ability to conduct fund switching, make withdrawals and top-ups, and the unlimited premium holiday.
Best ILP for Coverage
In this category, the Prudential PRUSelect Vantage wins as they have the widest range of riders, as well as coverage for death.
Prudential PRUSelect Vantage
Do take note that the Prudential PRUSelect Vantage does not cover terminal illness and TPD – something that the GREAT Wealth Advantage provides.
The only reason why we didn’t select the GREAT Wealth Advantage is due to the lack of information available for the riders they offer.
Investment-linked policies are typically not recommended for those who are interested in seeking out thorough life protection, so consider a term plan or life insurance for better coverage.
Best ILP for Those Looking for Dividends
Should you be interested in receiving dividends, the Manulife InvestReady Wealth II and the Tokio Marine #goTreasures are the only plans that offer a monthly pay-out, in which you have a choice to either cash it out or re-invest them.
Manulife InvestReady Wealth II
However, we’ll have to select the Manulife InvestReady Wealth II as the clear winner. Mostly because they are the first ILP to do this and have track records while the Tokio Marine #goTreasures is only released in mid-2021.
This will be reviewed when more information is shared with us about the #goTreasures’ dividend returns.
We hope that this compilation of the best ILPs in Singapore was useful in helping you decide what you should look for when getting an ILP and selecting one that’s best for you.
After all, this information is purely based on opinion and shouldn’t be considered as financial advice.
If you require advice or a second opinion, do engage a financial advisor from our network. These advisors were carefully selected to assess your needs and provide recommendations based on your needs.