wealthfactsheet-life_insurance-investment-linked

5. Investment-Linked Insurance
Investment-Linked insurance policy is the exact opposite when it comes to profits. Traditional life insurance policy participates in the company's profits. Investment-linked policies pass the investment risk entirely to the policyholders. This usually means that if the underlying fund of the policy performs well, then the policyholders will get good returns on their policy. However if the underlying fund performs poorly, the policyholders have to bare the investment losses.

The insurance companies make their money from the premiums they charge to the policyholders in the form of assurance changers or mortality costs. This is the part whereby these type of policy works well, in that it provides insurance cover for the policyholder unlike other funds which are purely investment by nature. The trade off is that policyholders pay extra for the assurance charges.

Investment-Linked insurance is for people who are from all walks of life. However this type of life insurance is mostly suitable for the following types of people:

1. People who wants to buy their first insurance policy.
2. For those who wants to provide protection for 'Family Income'.
3. For those who wants to provide 'Legacy' for the family.
4. People who wants to accumulate for their retirement
5. People who wants to accumulate for their children's future education
6. People who do not want the hassle of monitoring the market but enjoy the expertise of the professional fund manager at the same time enjoy insurance coverage on their lives.

Types of Investment-Linked Insurance:
1. Whole Life
People who are young and want the best of all things in one policy, this option suits them as they can start off with something they can really afford and slowly contribute and increase further into the same policy as time goes by. There are usually no term stated in this kind of policy. It is usually the whole of life. That means that if and when the policyholder wants to cash out on its policy whenever they want, they can.

2. Term Maturity (endowment liked)
This type of investment-linked policy usually bought for a particular purpose, such as, retirement, children education funding, etc. Because of a particular use needed at a later date, a term maturity investment-linked policy fits well so that people who purchase them knows what it is for. It acts like an endowment policy in that at the end of the term, the policyholder will get the maturity of the policy.

One draw-back is that if the market conditions are unfavourable at the end of the policy term, the maturity value might get affected.

3. Single Premium (lump sum)
As the name suggest, it is a one lump-sum payment. The advantage of a one lump-sum payment is that if you know that the market is bottom and want to take advantage of the opportunity, you can do so. But more often than not we do not know when the bottom of the market is.

When a person have bought this for a while and wants to top-up on the current plan, they can do so. It is usually call a single premium recurring or just a one time top-up.

These type of single premium policies usually have no term stated on them. They can be encashed at any time. However some insurance companies may market a single premium investment-linked policy with a specific term on them. Such policies are usually closed-ended funds.