If you are looking for an insurance product that offers more than just protection, investment linked insurance plans may the answer that you have been looking for. Investment-link insurance is an increasingly popular insurance option that combines insurance protection with investment opportunities.
Exploring the Key Differences Between Investment Linked Insurance vs Traditional Insurance
Investment linked insurance is becoming more and more popular in Malaysia. It does more than just protecting you, it also can help you reach your financial goals. Let’s explore what sets it apart from traditional insurance and the significant differences between the two.
Traditional insurance generally provides coverage only for insurance and does not have any investment component. In contrast, life insurance is designed to provide a payout of the coverage amount to the dependents of the insured in the event of an unexpected occurrence.
A traditional life insurance plan is a great way to ensure that you are taken care of and financially protected in case of any unforeseen events. This type of insurance offers a guaranteed amount at the end of the policy period or upon death, and it also builds “cash value” that exists in various ways depending on what they offer in the specific policy.
Investment Linked Insurance
An investment linked insurance policy or ILP insurance combines insurance protection with investment in unit trust funds. It offers protection against the risk of death as well as opportunities for your financial needs or for your loved ones in case something happens to you. In short, it is a 2-in-1 life insurance policy that not only provides coverage but also allows you to invest in specific investment funds based on your risk appetite.
Investment-linked plans offer more flexibility compared to traditional insurance as they allow policyholders to withdraw some of their account value during their coverage period. This type of insurance also allows policyholders to mix and match different types of coverage such as death, disability, illness, accident, and hospitalization with unit trust funds from the insurer, providing potential benefits for those seeking a tailored insurance policy that aligns with their risk tolerance. An investment-linked plan serves a dual purpose for its insurance premium payment:
- A portion is allocated for insurance protection;
- The remaining amount is invested in various investment funds.
Is Investment Linked Insurance Good? Benefits of Investment-linked Plan
In addition to the obvious benefit of having a combined protection and investment plan, there are a variety of other advantages that come with an investment linked insurance policy. Here are some advantages of ILP insurance that you should know:
Ability to Add More Protection
In addition to the Death and Total and Permanent Disability benefits that you already have, you can enhance your level of protection by purchasing additional coverage, such as medical coverage, critical illness, accidental, and hospital income benefits.
Freedom and Flexibility
You have the freedom to invest additional funds when you have a surplus and the flexibility to withdraw money in case of emergencies. Moreover, you can switch your funds at any time to take advantage of market changes and increase your investment account value. It can be done at any time. If you encounter financial difficulties, do not hesitate to withdraw your funds for emergency purposes.
You have full access to a clear and detailed record of all your transactions, allowing you to track where your funds are going. Additionally, you will receive regular statements that provide a precise breakdown of your insurance charges, investment value, and the current unit price of your funds. These statements ensure that you are fully informed about your policy and can keep track of all your transactions, giving you peace of mind at all times.
Low Insurance Charges
Purchasing an investment linked insurance plan at a young age can bring many benefits, including lower premiums. This advantage is particularly significant for recent graduates or those who are just starting their careers.
In addition to the lower premiums, investing in your plan early and leaving your funds to grow over time, you can potentially earn higher returns and maximize the value of your investment account. Therefore, it is advisable to consider investing in an investment-linked plan as early as possible to take advantage of these benefits.
Control Investment Risk
Many people think investment linked insurance plans are risky because of market fund performance, but you can control your investment risk by selecting funds and switching between them.
Should You Get Investment Linked Plan?
The investment-linked plan provides both protection and investment opportunities, making it a popular choice for first-time and experienced investors. Its flexibility and control over insurance coverage and investment growth make it attractive.
However, it’s important to note that investment-linked plans don’t guarantee fixed growth. As you age, more of your premium will go toward maintaining coverage, reducing the amount that goes toward investment funds. If you want to explore more or maybe if you are interested to get investment linked policy, here are some of the companies that offer the best investment linked insurance in Malaysia:
- Prudential Assurance Malaysia Berhad;
- Etiqa Malaysia;
- AIA Malaysia Bhd;
- Great Eastern Life Assurance (Malaysia) Berhad;
- Allianz Life Insurance Malaysia Berhad;
- Manulife Insurance Berhad.
It’s also important to keep in mind that Investment-Linked Insurance policies do not guarantee returns. As with any investment, this policy carries risks, and there is no assurance that you will get the returns that you want. At the end of the day, it is up to you whether you want to choose investment linked insurance plan or the traditional insurance policy.
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