Before year 2000, there are only traditional life insurance policy available to the market. Since then, some insurance companies in Malaysia had come up with many investment-linked insurance products. Let’s look at some major differences between the 2 type of policies: Investment-linked vs Traditional policy.
In the illustration below, I had used the Great Eastern 2 best-selling products: Greatlife Portfolio Insurance (Investment-linked) and Supreme Livin‘ Care (Traditional policy).
The 3 major differences:
1. Protection or Sum Assured
For traditional policy, the protection is guaranteed to increase to double of the initial protection over 20 years. In this case, from 50K to 100K. If the policy owner keeps paying the premium, the protection will just keep increasing.
For investment-linked, the life assured can choose from a range of protection. In this case, from 24k to 200k. The protection will remain fixed unless you request for changes.
2. Insurance Charges
Traditional policy charge the premium on an average. It is known as level premium. Meanwhile, the insurance charges of investment-linked policy will increase over time, according to your age. This make the it cheap when young, but more expensive when you are getting older. This is known as natural premium.
3. Cash Value or Return
Traditional policy: The bonus is declared in yearly basis. Once it is declared, it is said to be vested. It means when insurance company declared a certain amount of bonus to you, it is kept with your policy and won’t be taken away disregarding the market performance.
Investment-linked: Policy owner invest the remaining premium in the fund they choose. It can be a low risk fund such as fixed income fund, or other equity funds which are higher risk comparatively. Even though policy owner may get higher return or cash value when the market is bullish, but all the return might be wiped away when market turn bearish. 
Conclusion
So which policy suits you? I bought both. I know that traditional policy is the one I will keep for whole life. However, I might terminate my investment-linked policy when I retire. If not, I will at least reduce the protection to save on the ridiculous insurance charges at older age.
Related articles:
{ 4 trackbacks }
{ 5 comments… read them below or add one }
Hi KCLAu,
So if i get redeemed my investment-link insurance policy , how much money can i get back?
@Noob
You will get back the total investment value of your policy.
I bought sum assured RM50k of Supreme Livin‘ Care series 2 in 2004 (I was 30yr old). It stated in policy - last premium due in 2060. Few questions to make me clearly:-
1. Do I need to pay the premium for my whole life ?
2. No lump sum paid for Supreme Livin’ Care series 2 for 36CI ?
3. My supplementary benefits:-
a. ACB (expiry yr 2034) rm20K
b. LAR-TPD (expiry 2029) rm30K
Am I not getting any protection of above two after expiry date ?
4. How much money (roughly) I can get back at the age of 45, 50, 55 ?
5. What is protection sum assured in the year of 40, 45, 50, 55, 60 yrs ?
thx.
Can you give illustration for a buyer at age 35yr, life & 36CI protection rm70k, to cover difference between traditional vs investment link plan ?
1) initial premium
2) premium at age 40, 45, 50, 55, 60, 65.
3) protection at age 40, 45, 50, 55, 60, 65 for traditional plan (guess investment plan is fix)
thx.
@ Dennis,
1. Yes .. you need to pay premium for whole life as stated in the policy. However, you have the option to use the accumulated bonus to pay the premium.
2. When 36CI strike, you will be paid a lump sum of the sum assured plus bonus accumulated.
3. After expiry of the riders, the coverage provided by the riders is no longer valid.
4. Refer your quotation
5. Refer your quotation.
Thanks!