There are so many types of life insurance policy in the market. Currently there are 16 life insurance companies in Malaysia and most of them provides more than 10 products. So how do you choose your first insurance policy to buy?

Most likely when you are approached by an insurance agent, you are presented with Investment-linked policy. It actually makes sense to buy investment-linked policy as the first policy you should own. Here are the reasons and advantages:

  1. Transparency – Unlike the traditional policy such as whole life or endowment plan, an investment-linked policy reveals all your premium allocation clearly. This is what I call transparent policy – you can actually understand and see where your premium is used. Policy holder will receive a periodic statement that clearly and precisely lists all the premium allocation, relevant insurance charges, investment value and fund unit price. I owned both Great Eastern investment-linked policy and AIA investment-linked policy. Great Eastern sends me the report quarterly (every 3 months) and AIA is only once a year. Prudential also sends the report once a year. Besides this report, you will also get the investment-linked fund performance report annually. If you didn’t get the report stated above, please contact your agent. There is something wrong somewhere 🙂

  2. Low insurance charges – For fresh graduates, age around 23-25, it is normal for them to seek their first insurance agent and also the first insurance policy. When you are young, insurance charges are very cheap. Investment-linked policy calculates the insurance charges based on your age. They use a mortality table and clearly provide the insurance charges table in the policy. This means you can purchase high coverage with low premium when you are still young. Sometimes, the premium is even lower than a term policy.

  3. Flexibility – Once you get older, promoted, married, have kids, your protection needs eventually increase. When you retire, your kids are independent, your protection needs eventually decrease. Looking at this circumstances, investment-linked policy provides the flexibility to increase or reduce the premium, include or exclude certain coverage rider, supplementary benefits and sum assured. Put it simple, you can modify this policy whenever and however you want it to be.

  4. Integrated better health card – some insurance company like Great Eastern and Prudential, they provide better hospitalization and surgical benefits only for investment-linked policy holder. For instance, Great Eastern lets the investment-linked policy holder to include Health Protector (no co-insurance, cheaper insurance charges) in his policy. But if you only want a health card, Health Protector is not available to you. You would have to get a standalone card which is higher in premium and normally comes with co-insurance payment (means patient have to share the medical bill).

  5. All-in-one benefitsAll sorts of coverage can be included into your investment-linked policy. This includes accidental benefit, hospitalization income benefit, living assurance, critical illnesses benefit, health card benefit, lady care benefit etc. Almost all available protection riders can be included. You will find it easier and cheaper to have one insurance plan that can give you all the possible benefits you need.

  6. You control the investment strategy – Did you ever think that investment-linked policy is risky because it involves investment? Actually, you have the right to control the risk you can bear for your investment. You can choose which fund to invest, which strategy to use, which portfolio allocation to apply, and even when to do the switching from fund to fund which is normally free of charge. If you are skeptical about investment risk, just put all your premium into a fixed-income fund!

Related article:

Investment-linked vs. Traditional Insurance

Investment-Linked Insurance Policy: An Overview- Part 1


KCLau
KCLau

Personal finance author and trainer

    18 replies to "Why you should first buy Investment-linked Insurance Policy"

    • brenda

      Hi,

      How do we know it is a fixed ncome fund? Do we ask our agents on that or there is a place to check that?

      • KCLau

        It is shown in the annual statement of your policy, what funds your money is invested in.
        And you can change the allocation too.

    • SL

      Hi KC,
      I have an ILP with 100k coverage 7 years ago. Now I plan to buy a medical card. I’m not sure which is the better way? Buy it with existing insurance company and link to my policies or buy with another insurance company. What should I consider?

      • KCLau

        First, consider adding the medical card to your existing ILP.
        Advantage:
        – save policy fee (which is a regular amount per policy)
        – probably easier underwriting as they know your claim history

        Premium topup is most likely required.

    • Yan

      I’m 25, basic rm2k working as admin. I’m currently considering two investment-linked plan under AIA & GE. Both also rm150 per month. Which is better? As I know GE has an annual limit of rm990k but AIA rm100k only. Any advice? Thanks 🙂

      • Tan Kar Chun

        Hi Yan, Jonas here. Currently both GE and AIA have million annual limit for their medical card, but I would recommend GE because their Smart Medic Medical card has no lifetime limit anymore, it indicates how strong the company in their cash flow and how strong the stability of the company & of course it benefits customers.

        Do contact me for more details, 014-9299643 Jonas Tan.

    • YKWong

      Prudential or great eastern Investment-linked Insurance better?

      • Tan Kar Chun

        Do contact me about this, I can explain to you about this.
        014-9299643 Jonas Tan

        Thank you.

    • […] most popular form of life insurance to get now, however, is a variable or investment-linked policy. Basically, this form of life insurance builds cash value over time. Every time you pay your […]

    • Lawrence

      Hi! I would like to ask should I get a life insurance for my daughter (2 years old)? If do what type of insurance suitable for her? Investment link or traditional?

      • Tan Kar Chun

        Hi Lawrence,

        Investment-linked plans (ILP) and traditional have their own different purposes.

        Based on my planning, I’ll emphasize on the strong foundation of pyramid which is the protection first. Your daughter should get an ILP first because as mentioned above, you can purchase high coverage with low premium when you are still young.

        Traditional plans got many different types, there are savings plan, early critical illness plan, 2D plans and so on.

        You can contact me for more details, I’ll explain them in details to you. 014-9299643 Jonas Tan.

        Thank you.

        Jonas

    • […] Why you should first buy Investment-linked Insurance Policy […]

    • Y@N

      The benefits stated above is of not much value:
      1.Transparency – What is the most important things are the Sum Assured are stated clearly, and the amount of premium payable is transparant. For investment linked insurance, the premium is subject to revision anyway, unlike traditional plan whereby the premium is fixed.

      2. Low insurance charge – Despite the insurance charged is low, the minimum premium to be paid is marked up, i.e. buyer have to pay more for agents commission and forced to invest in the funds.

      3. Flexibility – People can always buy another traditional plan as and when required, as long as is healthy.

      • KCLau

        For traditional plan, the premium is also marked up for agents commission. Frankly, insurance agent would prefer the client to buy traditional plan because there will be less question asked and less service required overall.

        • balance

          you should write about the pros and cons between investment link and traditional policies, not just the pros of investment link..

          • Normal

            I strongly agree with what “balance” said… Investment link and traditional both have their own pros and cons…Thumbs up!!!

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