Avoid ILP policy with high charge

Dear Mr. Tan,

I plan to buy insurance for my two boys - 9 and 6 yrs old. My agent recommended me the ILP product.

I learned that ILP is not good as compared to traditional life policy or term insurance. The ILP insurance cost is high when I get older. If the invested funds are not performing, I risk to have negative value in my ILP policy.

I am confused whether to go ahead with ILP or go for term insurance for my boys..

REPLY:

It is best to buy Term Insurance for the life insurance protection and to invest in a low cost investment fund (e.g. unit trust). Read this FAQ:
http://www.tankinlian.com/faq/child.html

In selected an investment fund (unit trust or investment linked fund), look for a fund which invest 100% of the savings (i.e. no deduction to pay commission to the adviser) and which has low annual expense ratio.

I understand that the ILP from company X takes away 18 months of your savings to pay commission to the agent. You can check with the agent if this is the case. You should avoid this high charge.