A Personal Finance Blog for Malaysian: Why investment-linked insurance policies gaining popularity?

Monday, October 11, 2010

Why investment-linked insurance policies gaining popularity?

Investment-linked (also known as unit-linked) life insurance policies.

Click here to read article on Personal Finance from The Edge.

The insurers are transferring "the burden of growing financial asset value" to you as you are now to decide where to invest your money as opposed to they invest it for you in the traditional life fund (click here to understand where life fund invested in).

Pros
  • It offers the greatest flexibility;
  • Transparency in costs.
  • Lowest cost of insurance (COI) as compared to other traditional products.
  • You decide how much and where to invest your fund (e.g. 25% growth fund, 50% income fund and 25% blue chip fund)

Cons
  • You have to decide the allocation of fund. A wrong move could deplete your saving easily.
  • High COI for older age - be aware and to adjust for unnecessary level of coverage to reduce the COI.