An investment-linked plan is a life insurance plan that combines investment and protection. The premiums that you pay provide not only with life insurance cover but part of the premiums will also be invested in specific investment funds of your choice.
Normally, consumers will know what are the benefits of a proposed investment-linked plan and how much premium they need to pay. However, there is one important question that you must ask before applying the plan.
How long can the investment-linked plan sustain if I pay the same premium to enjoy the same benefits?
In the initial years, the premium you pay goes into investment when the insurance cost is relatively low. You will then start to accumulate some values in the investment because of the surplus and performance of the investment. At the later stage, the accumulated amount will be used to pay for the increasing insurance cost if they have exceeded the premium you pay.
The investment-linked plan will sustain until the value of investment is fully utilized. If you terminate the plan before it lapses, you will get back the remaining investment value. On the other hand, you may top up the premium in order to make the plan lasts longer if it has insufficient amount.
The policy sustainability can be estimated based on regular premium and the return projection of selected investment funds. Usually the projection of return is based on optimistic scenario and pessimistic scenario. All this information will be shown in the sales/benefit illustration whereby you can see until which age the value of the plan is nil or zero.
For some illustrations, they probably can only show up to 30 years. In this case, you may need to ask your agent or financial adviser further on how long the plan may cover when they generate the illustration.
In conclusion, it is good to know that how long the policy can sustain based on your monthly budget to avoid surprises when you become older. Make sure the plan can cover you for at least the minimum intended coverage period (e.g. 70 years old). Alternatively, be prepared to allocate more budget for topping up your premium into plan in the future.
For any further enquiries, drop us an email at email@example.com and our dedicated team of advisers will be happy to assist you.
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