AIA ILP Policy Help

[xdemolicx]

Hi. I have been reading through forums and various other channels. From what I have gathered, pretty much the online sentiments is the same. Buy Term Invest Rest, mostly revolving around that you are usually paying much more for ILP and you will actually be better off getting term for those insurance plans and investing the rest of the difference between what you pay.

However, I recently came upon this AIA ILP policy, which seems to differ from what ppl have been recommending.. and I am quite confused over what to choose.

AIA Family First Secure is the ILP policy: Individuals | Products & Services | Protection | Life | AIA Family First Secure

AIA Early Critical Protector as the Rider: Individuals | Products & Services | Protection | Health | Critical Illness | AIA Early Critical Protector

Basically, essentially, this coverage covers you fully 100%, whether ECI or CI, and along with that, you will also be getting insured for life and of course, this will be tied to a sum of money.

Using this as an example, if i am covered for CI + ECI with 50k, and Death + TPD for 100k, i will pay approx 150 per month as opposed to getting term CI + ECI for 50k, although I am paying lesser, the coverage is not as wide and there are also various limitations to the term policy, which makes things difficult and grey on what areas we can claim.

From what I have gathered as well, alot of the insurance ECI policies only pays 50%, but for this AIA coverage, we get paid 100%.

My question is.. if this is really the case. It seems to make sense to get the ILP with the rider rather thn the typical Buy Term Invest Rest.

I am definitely not a pro in this area and I can only understand this much from what I know. Can anyone help me with this?

Thanks!

 

[xdemolicx]

Anyone can offer any help in this area?

If the case of this is really true, thn in fact ILP perhaps is not as bad as what many has made it out to be..

Hope to be able to clarify on this.

Many thanks!

 

[Mr.Huttons]

One bad thing about ILP is that mortality charges increase as you age - meaning to say the amount of money you put in every month, lesser and lesser percentages of it gets directed to investment and more of it gets put to the premium for the death coverage.

Also ILP returns generally suck after they mature. Some policies even lose money due to inflation.

Just my 2c.

 

[Mr.Huttons]

Oh silly me what you mean are Life policies. What I meant was investment-linked policies (ILP).

Life policies in my opinion are good, but you should only get what you think is sufficient. Of course coverage is definitely higher in Term policies as there is no cash benefit.

 

[Spurs1978]

I bought Prulink Assurance Account (PAA) in Feb 2005. Sold to me by my army mate. At that time i did not know much about the product, just know it is an ILP, insurance with investment component. I thought it is a good way of forced savings, so bought it without much thought.

Coming to 10 years now, 115 months to be exact, my cash value is 74% of total premium paid. My assured sum is 150k death, TPD, CC. I just changed my insurance agent, she is rather new, but i parked all my policies under her cos my previous agent can't be bothered with me.

I asked her whether 74% is reasonable after 10 years. Of course she said good, usually need 15 years for ILP to breakeven. Recently I just spoke to another Pru agent, >10 years experience, senior guy, and i asked him the same question. He said very good already. I guess they are trained to say that when clients ask this question.

My point is no matter how the insurance companies package it, ILP is basically buying insurance + unit trust, not to forget the hefty commission you need to pay the company/agent, etc.

To give credit to ILP, the assurance charges for death/TPD/CC when one is younger (say before 40 yrs old) are in general lower than term insurance. However when one hits above 40 yrs old, the assurance charges increase rapidly, so much so that when one reaches the mid 50s, the premium usually cannot cover the assurance charges. So 2 options for you, either you allow the cash value to erode by maintaining the sum assured, or you reduce the sum assured to preserve your cash value. The first option defeats the purpose of buying an ILP since the main incentive championed by insurance companies is getting that cash value back. The 2nd option defeats the purpose of buying insurance as it does not make sense to me to reduce my coverage at a time i need it the most.

When you average out the assurance charges over a period of 40 years from age 25 to 65, term will still be cheaper than ILP. You are better off buying term and invest in unit trusts separately. It is essentially the same as buying ILP, EXCEPT that 1) You need not incur the hefty front end charges (commission), 2) You are not tied to a policy.

If I knew much more 10 years back, i will definitely buy term and not ILP.

Just my thoughts base on personal experience.

 

[s_kengnam]

Typical buy term invest the rest is good for Normal term that covers death, total permanent disability and critical illness.

But for Early critical illness, the term pricing is rather high ( due to higher probability of having Early critical illness). And most company term policies for ECI will only pay out 50% of your sum assured.

Thus for this case, ILP with ECI will be a better option (if you are trying to get coverage from now till 60 years old) even let's say the investment return is 0 percent growth. AIA so far is the only company that attached ECI with ILP. Some other companies attached ECI with a life policy. If you want ECI to cover until you are 100 years old, maybe you have to look at the charges that ECI will impose after 60 years old to make a better decision...

Hope this help

 

[w1rbelw1nd]

Financial engineering from the insurance company, through products such as ILP, may give you better terms at one time frame but make you pay more on the other time frame.

Ultimately, insurance companies' real and only value add to society is risk pooling (please correct me if I am wrong) . Making complicated products such as ILP and whole life policies merely changes cash flows to "suit customers needs", even though we are better off structuring the cash flows ourselves.

 

[MaoZeDuo]

Typical buy term invest the rest is good for Normal term that covers death, total permanent disability and critical illness.

But for Early critical illness, the term pricing is rather high ( due to higher probability of having Early critical illness). And most company term policies for ECI will only pay out 50% of your sum assured.

Thus for this case, ILP with ECI will be a better option (if you are trying to get coverage from now till 60 years old) even let's say the investment return is 0 percent growth. AIA so far is the only company that attached ECI with ILP. Some other companies attached ECI with a life policy. If you want ECI to cover until you are 100 years old, maybe you have to look at the charges that ECI will impose after 60 years old to make a better decision...

Hope this help

manulife standalone eci... 100% of sum assured payout...

 

[xdemolicx]

Thanks for the input everyone! Really appreciate it

 

[xdemolicx]

manulife standalone eci... 100% of sum assured payout...

Manulife has such a coverage? I will check it out as well.

Many thanks!