A less well-known vehicle for saving money and growing value is the investment linked insurance plan (“ILP”). ILPs may be attractive to women looking to purchase life insurance – with the added benefit of an investment component. The New Savvy offers salient information on the types of ILPs available and discusses the pros and cons of ILPs for savvy women who want to know more.
Investment-linked insurance plans serve first and foremost as insurance protection. They can offer life insurance for beneficiaries like a spouse and other family members. Total and permanent disability insurance may also be available, as may be critical illness and even hospitalisation coverage. An investment component of premiums paid into ILPs covers your selected insurance and associated fees at the same time as it’s growing the value of the policy. Investments are made in a range of owner-chosen sub-funds ranging from equity funds to interest, fixed incomebond funds and more.
As with any investment opportunity, women need to be aware of the potential advantages and risks associated with ILPs. The New Savvy can help.
It’s our goal to introduce vocabulary that will support you in intelligent discussions with a financial advisor about whether an ILP might be a suitable option in your financial planning. Learn the difference between front-end and back-end loading, which affect the rate at which the investment component is funded. Assess the financial impact of purchasing a single premium ILP as opposed to a regular premium ILP. Understand the meanings of offer price and bid price. Get a feel for your own risk tolerance and whether the pros and cons of ILP ownership match up with your overall plan.
Investment linked insurance can help diversify a portfolio. An ILP offers flexibility in choosing and adjusting the insurance coverage as well as the choice of sub-funds. Plan holders can usually make withdrawals as well as switch sub-funds.
However, there is a certain level of risk involved with ILP ownership. The New Savvy describes how ILPs are overseen by managers who actively administer the investment aspect, but it’s vital to know before investing that any funds may be susceptible to underperformance. ILPs also carry no guarantee of any cash value. And, since premium costs increase as one ages, the proportion of one’s investments earmarked for growth shrinks as investors get older.
The New Savvy is an extremely transparent resource to help you decide whether to pursue investment in an ILP. Getting acquainted with investment linked insurance is just a start, and that’s what we aim to help you do.