Do you know how investment-linked plans (ILPs) can add value to your investment portfolio? Unlike other types of investments, ILPs offer unique features that complement your other portfolios and help diversify your overall risk.

Unfortunately, ILPs often come with feedback ranging from high fees, to poorer-than-anticipated returns, and having no guaranteed returns.

But with the launch of new iterations that can overcome some of the biggest sore points, could ILPs be worth considering again?

Let’s take a closer look at how ILPs work.

What are Investment-Linked Plans (ILPs)?

ILPs are insurance policies that offer both protection and investment. Unlike life or health insurance policies, which only provide protection, ILPs allow policyholders to invest in various funds, which provides an access to equities and bonds of different countries, sectors and currencies. This means that a portion of your premiums could be used to provide you with insurance coverage, while the rest is invested in funds.

Due to how it’s structured, ILPs have built a reputation for being unnecessarily complex and sometimes expensive. But is it really?  

The evolution of ILPs

Usually with ILPs, your premiums are used to purchase units in your chosen investment funds. The number of units purchased depends on the price of the units on the day of purchase. A portion of these investment units are then used to fund the insurance component of your policy.

As you grow older and insurance costs become higher, more investment units are required to fund your insurance coverage, which ultimately affects your potential rate of returns. This is one reason why people prefer to keep their investments and insurance separate instead of purchasing an ILP.

However in recent years, new iterations of ILPs like investment-based ILPs, have sought to eliminate these pain points. Instead of splitting your premiums to fund both protection and investment components, all of your premiums go into buying investment units instead, which gives you more bang for your buck!

With these newer ILPs, you will still enjoy insurance coverage, where payouts are usually pegged to your account value or percentage of premiums paid.

For instance, with Etiqa’s Invest smart flex and Invest builder plans, the death benefit will be your account value or 105% of the net premiums¹ paid, whichever is higher. You will only have to pay an insurance fee in the event that your account value is below the net premiums paid.

When should you buy an ILP?

There are several reasons why you might consider buying an investment-linked plan.

It’s a viable option if you are looking for:

1.   More value for your money

One of the most significant advantages of ILPs is most of them tend to offer policyholders with upfront rewards that are usually in the form of bonus units. These are additional units added into your investment by the insurer, which could help to enhance your returns when the markets are doing well and may soften the impact on your portfolio when the markets are bad. 

Sometimes, you may also find promotions that can also help you enhance your returns. 

In addition to a cashback promotion of up to S$2,500², here's what you can enjoy with Invest builder and Invest smart flex:

2.   Affordable investments

ILPs are often thought of as expensive or an ineffective use of your money, but it isn’t necessarily true.

With Etiqa’s regular premium ILPs, you can start investing from as little as S$200 per month⁶, awarding you exclusive access to funds that are usually reserved for the high-net-worth or institutional investors.

Besides breaking up the premiums into manageable chunks, regular premium ILPs have another advantage – Dollar Cost Averaging. Dollar Cost Averaging is an investment strategy that involves investing a fixed amount of money at regular intervals over a period, regardless of the market conditions.

By investing a fixed amount of money at regular intervals, you can buy more units when the price is low and fewer units when the price is high, resulting in a lower average cost per unit over time. 

It is also a strategy that helps you ride out market volatility over the long term, which can be timely in today’s economic climate.

3.   Flexibility

A misconception that people have about ILPs is that it is rigid and lacks transparency  But did you know that Invest builder and Invest smart flex offer free, unlimited fund switching⁷?

You’ll get the best investment results when you have the flexibility to adjust your investment strategy to suit your changing financial circumstances or goals.

For instance, you may want to diversify your investment across different sectors, geographies and asset classes to better manage your risks in a bear market, or simply switch to more conservative funds as your goals shift from wealth accumulation to wealth protection.

With Etiqa's Invest builder and Invest smart flex, you’ll also enjoy the flexibility to make partial withdrawals at no charge or take a premium holiday. This helps to ensure that your financial plans don’t get derailed even when life throws you curveballs.

4.   A back-up plan

While you can achieve the same investment objectives by investing directly into unit trusts, bonds or ETFs, ILPs may have certain advantages if you are looking for a contingency plan.

ILPs provide insurance coverage that can serve as a safety net in case of unforeseen events such as death, disability, or critical illness. 

Some ILPs may also come with optional riders that you can purchase to enhance your critical illness or terminal illness coverage. This can help to protect your loved ones from financial hardship by providing payouts to cover expenses such as medical bills, living expenses, and education costs. It can also help to support the payment of premiums if you get struck with disability or critical illness and meet with affordability restraints.

In contrast, with direct investments, there is no insurance coverage nor the option of leaving a legacy by exercising a change in life assured and policy assignment.

5.   Professional investment advice

Want to invest but can’t find the time? Click here to leave your details for a quick 30-minute chat with Etiqa’s Assurance Managers (AM) and get S$20 cash⁸– no purchase needed!

Investing in an ILP comes with risks so it would be prudent for an AM to assess your risk appetite and financial goals to determine if it’s a suitable solution for you. 

Tap on the expertise and market knowledge of these AMs who can help you curate funds based on your risk tolerance and investment objectives. If you don’t wish to customise, you could also consider plans that offer you the option of choosing between portfolio funds from conservative to aggressive. 

In addition to being monitored by your AM, these funds are also actively managed by in-house investment specialists who regularly review and rebalance the funds, to help you work towards the returns you desire.

Get more out of your investments with Singtel and Etiqa Insurance

Get peace of mind when you invest with Etiqa’s ILPs. Offering value at wallet-friendly prices, ILPs such as Invest builder and Invest smart flex are great options that could potentially give you higher rates of returns depending on your risk tolerance and desired investment horizon.

Make your money work smarter, not harder.

Unlock exclusive rewards available to Singtel customers only – get up to S$2,500, PLUS extra bonus units when you invest with Etiqa!