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.
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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.
@ 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!
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.
KC:
It’s good you differentiate between Trad vs ILP.
Hence, i am in a same dilemma now, to choose between Trad or ILP for my 36CI+MC
Below is
Age : 31 yrs 11 months
Sex : Male non smoker (C2)
Sum Assured : 200K for 36CI, R&B 150 annual limit 65k lifetime 625k
@KL
For health card, it is better to attach it on ILP to avoid the trouble of policy lapse.
This may happen to standalone credit card when you forgot to pay premium
KC:
It’s good you differentiate between Trad vs ILP.
Hence, i am in a same dilemma now, to choose between Trad or ILP for my 36CI+MC
Age : 31 yrs 11 months
Sex : Male non smoker (C2)
Below is quotes:
A : ILP
Sum Assured : 200K for 36CI, R&B 150 annual limit 65k lifetime 625k
Premium : RM270
Projected Return only after 20 yrs : 52K
B: Whole-Life non par
Sum Assured : 200K for 36CI, R&B 200 annual limit 115k lifetime no limit
Premium : RM453
Guarantee Return after 20 yrs : RM63K
According to your statement, you take both, can you illustrate how are you spread across the t plan.
Thx
Hi KL,
It depends on your budget.
If you have RM400/month for paying premium – you can spread 50-50
Hi KC, Thanks for the article.
With regards to ILP, shouldn’t one be concerned about the price of the units?
The price fluctuates according to the underlying equities as can be seen over the last 12 months whereas insurance charges increase as one gets older as illustrated in the charts above – what happens when there’s mismatch? i.e. when price is low when charges are high. Your thoughts?
Thanks.
Your concern is valid. That’s why ILP is not so suitable for elder people.
Hi Lau,
Im 27 years 9 months currently, in dilemma to choose the best insurance plan for myself. Is ILP best for my age? Can u suggest me the best insurance plan with few requirements here; high reimbursement for death, accidents(100k-200k), total permanent disable(100k-200k w annual benefit), got cover high medical benefit/ expenses(20k per annum or any), got investment saving plan, and worth for life.FYI, previously 3 times(in 3 yrs) i did change my insurance plan due to benefit was not so good. all already suspended.now im looking for new life insurance.
TQ.
Hi Mr Lau ,
i think i need some assistance from your advise , im thinking to buy only medical card .
my friend ING ask me to buy IMplus2 .
which medical card plan is the best among 16 other ins ( i read your earlier post somewhere )
please email to me ahping85@gmail.com
Hi Han Pin,
I think there is no such thing as best plan in the market. The is always pros and cons.
If not, one plan would be dominating the whole market.
Just compare a few plans from reliable companies.
Dear Mr Lau,
i can suggest you for Pruhealth medical plan. They is non-claim bonus, minimum RM50k annual limit with minimum lifetime limit RM500k. Can claim the dialysis treatment and cancer treatment using the medical card annual limit.
If you would like to know for more details, you can contact me at 012-2800626/012-4860626
Dear KC Lau,
I have been effect the Great Eastern Supreme Livingcare Series 2
policy in year 12/01/2004. After few years due to financial problem, i’m not make the premium start from mid year of 2007 till Sept 2009. In around Oct 2009, i try to pay back the premium.
My issue now is, up to todate, the APL Balance is RM3,176.24.
And, there was Cash Bonus Balance of RM561.51
My question is, isn’t good to apply the cash bonus to pay the APL? or just leave the Cash Bonus, but continue pay the monthly premium until the APL settled?
I think you should ask GE directly about your policy status.
If there is the cash bonus there, you should ask GE to pay the premium with it.
To settle the APL, you will have to pay more than the usual premium regularly.
Supreme Living care – Why i dont see the Sum Assured drop after age 80 ? I refered to the quotation given by the agent.
by taking into account all the cash value accumulated, the death benefit won’t drop.
Why did BNM allow ILPs which allocate more than 50% of the premium to pay commission and general expenses of the insurance company? Isn’t this too expensive for the policy holder while the returns may not commensurate with such a high maintenance & management fee? In addition, ss the above amount refunded when the insurer decided to void a policy and give no protection to the policy holder? if not, why? Thanks.
Hi Amanda,
The allocation is mainly to compensate agents as an incentive to sell the policies and serve their customers. BNM has a guideline for the commission allocation. As long as insurance companies design plan within that guidelines, the plan will be approved.
Hi, KCLau,
My fren advise me to terminate my current life traditional policy and go to the Investment link policy which is low premium and high coverage. I mean the yearly premium rm3500 I paid can get better package with more ceoverage. What your opinion?
Hi Cheang,
Of course this is applicable. But you must understand that ILP is good as a start. But it might not be the policy you will keep until old age.
Hi KCLau,
I am trying to get an insurance plan for my mum, she is 55, housewife, non-smoker.
There is an insurance agent quoted me such a plan with all these included:
i. Medical card – 750k life time limit, 75k annual limit. Cover until age 80.
ii. Life coverage – 38k. Life time coverage.
iii. PA – 50k (said to be given free)
Premium is 2.8k per year for at least 15 years, after that might need to top up.
My question is, is 750k life time limit too much for my mum? No doubt the main reason i wanna buy her a plan is to give her medical protection, but i was thinking like 300k-350k kind of plan. Is this enough?
Is the quoted plan a good plan overall?
Hi Aileen,
There should be a lower plan. Just ask your agent to quote a plan with lower medical limit.
Overall, the plan is competitive.
Hi Mr Lau,
My mum bought for me a life policy from GE many many years ago. She had stopped paying for it a long time ago and ever since then GE has been using the cash bonus to offset the premiums. It subsequently ran out of cash bonus and I am now paying for it on a monthly basis.
A week ago i received a statement from GE claiming that the last payment made was in December and when i called them up they said that they have used the cash bonus to pay up for the month of Jan and Feb. my question is:
1) Can i opt to stop the option where they use the cash bonus to pay for the premiums
2) Can i pay back the premiums owing in Jan and Feb so that my cash bonus won’t be affected
3) Can i pay back all the cash bonus that have been used in the last 10 years or so.
thanks,
Leon
Hi Leon,
You can visit any GE branch and get advise about the policy premium.
1. yes. You can do that by choosing different cash bonus option – need to fill up a form.
2. I am sure you can pay back the premium owed. For the cash bonus that had been used to pay outstanding premium, it is irreversible. But if it is a policy loan, yes you can pay back the money plus some interest charge. Better to ask about that directly at GE branch.
3. I don’t cash bonus used up is irreversible. Only the policy loan can be paid back to GE.
I’m 47 yrs & my wife 39 yrs with 2 kids, 10 & 14 respectively. Which insurance plan & medical card is best for me & my family. I can affort to pay total monthly premium of $500/= till 80 yrs old.
*Never concern about getting back money at old age but more on coverage [sickness & operation/injury]. So not much on Investment-linked insurance.
Regards.
Investment-linked with medical card rider will be suitable for you.
You can contact me at insurance@kclau.com
Please provide the details below in the email:
- Date of birth:
- Contact number:
- Occupation:
- Where do you stay?
I will get back to you then.
Hi Mr.Lau,
i’m planning to get a keyman insurance for my client. which plan will be more adviseable to be taken? is it Tranditional or investment link product.? i’m looking at 10 to max 20 yrs of period.
normally, ILP may be cheaper compared to term insurance, especially when you are looking for 10-20 years protection only.
if i take ILP can it be consider company expenditure? coz my agent told me only term insurance can be consider company expenditure for tax purposes.
Hi Raymond,
Your agent is right. There is no tax advantage.
I am an agent from Great Eastern. My husband has an insurance which he bought from Prudential before we are married. It is a 4 yrs old plan which he paid RM120 for RM120k protection. I am still keeping the policy with Prudential. We bought a Smart Protect Medical card recently with RM220/mthly for RM170k (3d). Also a Great Enhanced Living Care of RM240/mthly. I am contemplating whether should i mininise the RM220 which I paid for Investment Link ( i will still keep the medical card & maintain the minimal coverage for life) & transfer the cash to Great Enhanced Living Care, in view that he is still keeping the RM120k plan with Prudential. This is because the return (if ntg happen) wld be better for Great Enhance Living care, rather than INvestment link plan.
Hi June,
I think your plan is fine. The combination is quite balance.
Greetings & G’Day,
Getting a term life insurance(renewable/term life) and investing the extra in other form of investments like stock markets(if u got the knowledge/patience) or unit trusts..
Why TERM Insurance ?
Term Life Insurance is “”very cheap”" premium and the death coverage sum is VERY HIGH should there’s any death incurred to the insured breadwinner.Nowadays, many “packages” or we called in All-in-ONE package of life insurance / endownment plan which force clients/customers to perform a saving/investment.
By Getting 1) a term insurance with 36 critical illness 2) medical card and 3) PA will be sufficient enough for a breadwinner. If possible, work in a company that provides medical card for employees(some saving on normal medical card coverage). If no longer works for the company, get own medical card.
Usually term insurance is depends on own needs. If the breadwinner got young infants/children to provide them education, living ..etc,, the insured might need term insurance up to only 15 – 25 years(renewable/term life) only. Any life death during the 15- 25 years, his young children able to survive with the HUGE SUM PAYOUT. If nothing happen during the 25 years tenure, by then, his children already independent, graduated from college/university. The extra, the breadwinner might invest it on stock markets/units trusts..
You can compare the premium payment for the term insurance and ILP/Endownment/Whole Life (with or not with particating plan ), and you ‘ll surprise the premium cost and the death sum coverage where huge differents between them.
In olden days, people BUYs term insurance is to HAVE BIG Coverage Plan for Beneficiary to survive for long years(depends on their young infants/childrens to become independents) if anything happens to the breadwinner.
Why pay BIG Premium with ++small/ordinary++ SUM Coverage Payout with “force” saving/investment plan?
http: //en.wikipedia.org/wiki/Term_life_insurance
Just a thought. Have a great day & Enjoy Learning !!
Thanks for your information. I really hope to see very much cheaper term assurances being offered by local insurers.
Greetings & G’Day,
There are many term insurance( annual renewable/term level life) available in the market today.. Term insurance is not the traditional whole life(with or not with participating plan).. You may search google or yahoo for term insurance, or compare whole life endownment plan with term insurance.
Nowadays, our society really does not know what are the differences of insurance available today. And the main problem is, our financial adviser/insurance agents always recommended ALL-IN-ONE package(high commission) to clients/customers with all coverage.. But does those coverage really need or not? And coverage is small with high premium. Example:- Life/Death coverage of RM150K , it will took less than 3 years for the beneficiary + their young childrens to spend and finish off (expenses + cost of living,car/home loan. RM50K per annum).. Why pay high premium for low death coverage?
Example:- A person age 35 year olds, non-smoke, term insurance(level term life for 25 years) coverage of RM300K(Death) with 36 critical illness and disability benefits cost RM2k annually.
Monthly Cost = RM 166.67 ( Cheap bargain premium payment).
Basic CONCEPT:- Buying insurance is to protect the beneficiary + young childrens to survive should any disaster strikes the breadwinner. Get high payout with low premium payment.
Have a great day. Just a thought of mine,.
I have a plan by GE agent. It’s a combination of whole-life and investment-linked.
I am a male 26yrs non smoker.
Whole life Great Enhanced Living Care: Death, TPD, 36 CI : 50k coverage
Yearly premium: ~RM1,600
Investment-linked Smart Protect Essential Insurance 2: Death, TPD, 36CI, Medical Card SM150 : 50k coverage
Yearly premium: RM1,800
Should I take both plans or I just take one of it? I can pay additional premiums if I just take one of it. But I need the medical card after retirement. Should I go for term insurance for medical card?
Thanks in advance.
Depends on your budgeting, it is encouraged to continue if you could afford.
Dear baxxor8.
I like your question and would also be keen to hear from KCLau’s point of view.
I think he would probably recommend you to take both based on his previous article in this blog. From my personal research, both combination of traditional and investment-link is the ultimate best plan. He enjoy the benefits of both.
For your info, I am also thinking of buying another traditional policy like what you mentioned RM50K for whole life with critical illness in addition to my current ILP of RM200K plus medical card of SmartMedic of RM200.00.
I have a few friends who had cancer during the last 10 years and honestly, RM200K is confirmed definitely not enough. But I cannot afford to insure further more due to budget constraint.
Hope this helps.
KCLau, sorry if I had taken over your role here…..
All as long as depend on your budget that you can afford.
Christopher, thanks for your effort to answer the question here. I like your comments and this is my recommendation as well.
hi kclau
i’m in the midths to get my company biz insurance soon and i’m also looking into doing trust. can u recommed me any reliable trust company? thank u .
Hi Raymond,
You can go with Rockwills. Some lawyers are also very familiar with this.
If you want me to refer someone, please contact me via email.
Thanks
Hi Christopher & unknown, thanks for the advice! I think I will combine both policies then.
Taking both policies would be good.
Hi KCLau
From your website, you have been so helpful in giving your thoughts and advice. I have sent you an email and would really appreciate your thoughts please.
Thank you so much!
Rgds.
Lim, I’ve got your email and replied you.
Hi KCLau,
I have been effect the Great Eastern Life insurance in August 1994.
This month my bill is like this:
Premium Due on 04/08/2010:RM1170.30
Less:
Cash bonus balance RM3885.86
Total 0.00
Will i have to pay after the 3885.86 is fully deduced or I will not need to pay anymore since already 15 years?
Hi Yap,
It is hard to say because the bonus declared every year may differ. You can choose to pay only the difference when your current year bonus is not enough to cover for the year’s premium.
You can ask the customer service personnel at GE to give you an explanation and how long the cash bonus may last.
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