Charges under a investment linked policy

Dear Mr. Tan,

I am confused about the many charges under an investment-linked policy. The insurance agent does not explain them clearly to me. I am now stuck with these high charges. Can I get out of them?

REPLY

It is better to buy a low cost Term insurance, to provide the life insurance protection. You should invest in a unit trust or an investment fund with low upfront or annual charges.

If you invest in an investment-linked policy, make sure that 100% of your premium is invested and that the only charges are the initial spread (which should not exceed 3%). Make sure that the annual charges of the fund is less than 1.5%.

A good example is the Combined Fund from NTUC Income, which you can buy through the Flexi-link plan.

You should avoid the regular premium investment linked plan as it has another layer of charges that can take away 15 to 21 months of your savings (with a few exceptions).

You can read the following FAQ to understand the charges in an ILP:
http://www.tankinlian.com/faq/ilp.html