Investment-linked Policies (ILP)

How it works

• Premiums buy units of the chosen ILP funds according to the allocation rate.
• The policy’s account value equals the total value of all fund units held.
• Insurance charges and policy fees are usually deducted by regularly cancelling fund units.
• Within the policy’s rules you can switch funds, make partial withdrawals or top up; some policies offer a premium holiday.

Key concepts

Concept	Meaning
Fund units	ILP funds are priced in units, and the unit price moves with the fund’s net asset value.
Cost of insurance (COI)	Charges for providing death and other cover, usually rising with age.
Fund management fee	An annual fee charged at fund level, already reflected in the unit price.
Premium holiday	The policy stays in force while premiums are paused, but charges are still deducted and the account value may fall.
Prospectus and fund information	Each ILP fund has a prospectus and product highlights sheet showing its objectives, risks and fees.

Usually suitable for

• People with a long-term investment plan who also need some protection
• People who accept investment fluctuations and are willing to review regularly

Usually not suitable for

• People who cannot bear losses on their principal or need guaranteed returns
• Money needed in the short term

Risks to note

• The account value fluctuates with the funds and principal may be lost.
• Fees erode the account value; understand each one.
• If the account value is not enough to pay the charges, the policy may lapse.
• Early surrender or withdrawals may incur charges.

Questions to ask

• What are all the fees, and how much is each?
• Which funds can I choose, and what are their risk ratings?
• What is deducted during a premium holiday?
• What charges apply on surrender or withdrawal?