WL and ILP difference

[reddybear76]

I noticed there is alot of negative sentiments concerning the ILP and i am recently looking into purchasing an insurance policy for myself.

Comparing between WL and ILP, i cant really notice there are much differences between the 2 and wanted to seek some help on this..

Both policies seems to have the cash value that we will need to pay for.. But how come ILP is generally more shun away from?? I heard that for ILP, mortality cost increases overall.. But does that mean there is no mortality cost for WL?

I will be getting term as well but i would like a life policy with limited payment term so that at least i am covered for life too.

Appreciate the advice given by the many experts here. It has been extremely helpful. Thanks in advance!

 

[Relia_tan]

Hello reddybear76

In short ILP's cash value is being accumulated by growth of the fund(s) that is selected by an individual.

The general consensus here is that if one is able to protect himself/herself via Term Plan (with coverage expiring at Age 65, 75 or 99) while doing his investment through selection of ETFs, more profits (or so to speak cash value) can be earned.

Even though Whole Life plans provide cash value(surrender value), it should never be seen as profitable earnings but rather a slight bonus should one decide to stop coverage at later stage of his/her lifespan (typically Age 75 onwards).

I noticed there is alot of negative sentiments concerning the ILP and i am recently looking into purchasing an insurance policy for myself.

Comparing between WL and ILP, i cant really notice there are much differences between the 2 and wanted to seek some help on this..

Both policies seems to have the cash value that we will need to pay for.. But how come ILP is generally more shun away from??

I will be getting term as well but i would like a life policy with limited payment term so that at least i am covered for life too.

 

[Perisher]

Hello reddybear76

In short ILP's cash value is being accumulated by growth of the fund(s) that is selected by an individual.

The general consensus here is that if one is able to protect himself/herself via Term Plan (with coverage expiring at Age 65, 75 or 99) while doing his investment through selection of ETFs, more profits (or so to speak cash value) can be earned.

Even though Whole Life plans provide cash value(surrender value), it should never be seen as profitable earnings but rather a slight bonus should one decide to stop coverage at later stage of his/her lifespan (typically Age 75 onwards).

Let me guess, you are an agent?

Because you didn't explain the bad points of ILP which is a defining characteristic of most agents when they talk about ILP.

There is a chinese idiom for it, 避重就轻.

 

[akwl88]

I noticed there is alot of negative sentiments concerning the ILP and i am recently looking into purchasing an insurance policy for myself.

Comparing between WL and ILP, i cant really notice there are much differences between the 2 and wanted to seek some help on this..

Both policies seems to have the cash value that we will need to pay for.. But how come ILP is generally more shun away from?? I heard that for ILP, mortality cost increases overall.. But does that mean there is no mortality cost for WL?

I will be getting term as well but i would like a life policy with limited payment term so that at least i am covered for life too.

Appreciate the advice given by the many experts here. It has been extremely helpful. Thanks in advance!

insurance jiu purely insurance. dont go mix ilp or what. take a term plan and then go invest

 

[reddybear76]

Let me guess, you are an agent?

Because you didn't explain the bad points of ILP which is a defining characteristic of most agents when they talk about ILP.

There is a chinese idiom for it, 避重就轻.

Hi Perisher! I noticed that u have been providing alot of useful tips for newbie investers like myself. Can you advise me on the main underlying reason why limited term WL is better than an ILP?

I did notice that I will be paying for life though for ILP as opposed to the limited term WL.. Which i think is another impt factor.

 

[Perisher]

Hi Perisher! I noticed that u have been providing alot of useful tips for newbie investers like myself. Can you advise me on the main underlying reason why limited term WL is better than an ILP?

I did notice that I will be paying for life though for ILP as opposed to the limited term WL.. Which i think is another impt factor.

Isn't that your job?

These threads will go into details on why not ILP.
http://deluxeforums.hardwarezone.com.sg/money-mind-210/want-cancel-my-ilp-5175595.html
http://deluxeforums.hardwarezone.co...-ilp-plan-after-7-years-my-story-4461503.html

 

[FP_IFA]

WL
- There is a guaranteed cash value
- Non-guaranteed bonus is projected at 3.25% and 4.75%. The worse is no bonus, the best is 4.75%. It will not go outside this range. Even if economy is good, you will only get 4.75%
- You have no control on what funds or bonds the insurer invest on
- Cover for life

ILP
- No guaranteed value. If economy crash, your plan cash value will crash as well
- Non-guaranteed cash value projected at 4.0% and 8.0% but it is irrelevant. Your cash value depends on how well the fund is doing. It can be more than 8.0% or it can be negative.
- You chose what fund to invest and you can change it later as well
- Cover for life but mortality cost is not level makes it hard to maintain the policy after certain age especially if the economy is not doing well at the same time

Note that a couple of new WL plans now focus a lot more on terminal bonus now. This is not as good as the older WL plans.

 

[limster]

The question to ask for WL or any policy including ILP is: Assuming 4% growth of participating fund, how many years does the policy take to breakeven (breakeven means Surrender value= premiums paid). Anything more than 10 years, just walk away.

If you read further, you will find out that there were policies that broke even after 7-8 years and after that and return a CAGR of 4% (some say 5% also got but they entered during a good year).

 

[Aceachiever]

I noticed there is alot of negative sentiments concerning the ILP and i am recently looking into purchasing an insurance policy for myself.

Comparing between WL and ILP, i cant really notice there are much differences between the 2 and wanted to seek some help on this..

Both policies seems to have the cash value that we will need to pay for.. But how come ILP is generally more shun away from?? I heard that for ILP, mortality cost increases overall.. But does that mean there is no mortality cost for WL?

I will be getting term as well but i would like a life policy with limited payment term so that at least i am covered for life too.

Appreciate the advice given by the many experts here. It has been extremely helpful. Thanks in advance!

Hi reddybear76,
Usually when we purchase a WL or term policy, we are buying to leave behind some $ for our family (spouse and children, parent if single, etc) so that they receive some financial payout from the insurer when we are not around and enable them to have some replacement income for a few months/years depending on the sum assured and their lifestyle/expenses.
Although WL policies have cash values (or surrender values) unlike term plan, but when we are old with possibility of poor health, we most probably wouldn't want to surrender it because we do not want extra burden for the family if we were to pass on.

ILP on the contrary would be the policy we might consider to surrender early because of the rising mortality cost when we get old which could be more costly than the premium we are paying. Unlike ILP, WL policy have fixed mortality cost.

Nowadays many WL policy have a limited payment term (e.g. 10,15,25 years, etc) but ILP required you to pay whole of as long as u live. Although some might argue that ILP enables u to go on premium holiday but doing that will also reduces your accumulated cash values.

In conclusion ILP is a good policy when you start young and allow u to withdraw 90% of cash values when u need it for major life events such s marriage, renovation, children education, etc.

You should ask yourself what is your priority before committing to any of the policy.

 

[limster]

In conclusion ILP is a good policy when you start young and allow u to withdraw 90% of cash values when u need it for major life events such s marriage, renovation, children education, etc.

Time to give the new crop of insurance agents selling ILP the usual warm welcome.

Forgot to mention that at the point you want to withdraw your ILP "cash value", you wonder "how come the cash value is so tiny compared to the amount of premiums I paid?"

The answer of course is that ILP premiums are needed to fund the agent's major life events such buying a BMW, new house, etc.

 

[Perisher]

Hi reddybear76,
Usually when we purchase a WL or term policy, we are buying to leave behind some $ for our family (spouse and children, parent if single, etc) so that they receive some financial payout from the insurer when we are not around and enable them to have some replacement income for a few months/years depending on the sum assured and their lifestyle/expenses.
Although WL policies have cash values (or surrender values) unlike term plan, but when we are old with possibility of poor health, we most probably wouldn't want to surrender it because we do not want extra burden for the family if we were to pass on.

ILP on the contrary would be the policy we might consider to surrender early because of the rising mortality cost when we get old which could be more costly than the premium we are paying. Unlike ILP, WL policy have fixed mortality cost.

Nowadays many WL policy have a limited payment term (e.g. 10,15,25 years, etc) but ILP required you to pay whole of as long as u live. Although some might argue that ILP enables u to go on premium holiday but doing that will also reduces your accumulated cash values.

In conclusion ILP is a good policy when you start young and allow u to withdraw 90% of cash values when u need it for major life events such s marriage, renovation, children education, etc.

You should ask yourself what is your priority before committing to any of the policy.

I wonder if you read the links I posted dear agent.

 

[anfielder]

WL
- There is a guaranteed cash value
- Non-guaranteed bonus is projected at 3.25% and 4.75%. The worse is no bonus, the best is 4.75%. It will not go outside this range. Even if economy is good, you will only get 4.75%
- You have no control on what funds or bonds the insurer invest on
- Cover for life

ILP
- No guaranteed value. If economy crash, your plan cash value will crash as well
- Non-guaranteed cash value projected at 4.0% and 8.0% but it is irrelevant. Your cash value depends on how well the fund is doing. It can be more than 8.0% or it can be negative.
- You chose what fund to invest and you can change it later as well
- Cover for life but mortality cost is not level makes it hard to maintain the policy after certain age especially if the economy is not doing well at the same time

Note that a couple of new WL plans now focus a lot more on terminal bonus now. This is not as good as the older WL plans.

You don't get 4.75% if the participating fund gets 4.75% returns. Need to account for insurance charges, distribution costs, profits to shareholders etc.

And I don't think 4.75% is a cap. It is just given for illustration purposes.

 

[akwl88]

You don't get 4.75% if the participating fund gets 4.75% returns. Need to account for insurance charges, distribution costs, profits to shareholders etc.

And I don't think 4.75% is a cap. It is just given for illustration purposes.

simply put, u give ur own money to them for them to invest. it is up to them to give u how much back?

 

[Shion]

Just look at the ILP funds from the various insurance websites. Many are not actually performing that fantastic as what your agents claim to be.

Agents also avoid telling you the additional charges for ILPs (which are printed at the back of your insurance policy). These charges increases drastically as you age.

Agents also like to tell you about "premium holiday" and how lucrative it is. Useful ? Whatever you earn from your investment in ILP is used to offset the insurance premium. Why invest in the first place if so ?

 

[anfielder]

simply put, u give ur own money to them for them to invest. it is up to them to give u how much back?

not exactly true, as there are regulations on how much of the profits from the participating fund they can retain. just be aware that there are charges that agents may not fully explain.

 

[anfielder]

Just look at the ILP funds from the various insurance websites. Many are not actually performing that fantastic as what your agents claim to be.

Agents also avoid telling you the additional charges for ILPs (which are printed at the back of your insurance policy). These charges increases drastically as you age.

Agents also like to tell you about "premium holiday" and how lucrative it is. Useful ? Whatever you earn from your investment in ILP is used to offset the insurance premium. Why invest in the first place if so ?

It's not just the mortality charges. There's also administrative charges ($60/yr for Prudential) and fund management charges (something like 2% per year, charged whether you make money or not). And when they sell your units to pay the mortality/admin charges, there's a bid-ask spread.

 

[FP_IFA]

You don't get 4.75% if the participating fund gets 4.75% returns. Need to account for insurance charges, distribution costs, profits to shareholders etc.

And I don't think 4.75% is a cap. It is just given for illustration purposes.

Yup, what I mean is the figure displayed on the 4.75% is the max you will get. If the investment return a 5.00%, they will still give you 4.75%.

It is a cap. I know the older plan has 5.25% illustrated but thats for the older plan.

 

[FP_IFA]

Very often an agent selling ILP will use the 8% column to preach his plan. Unfortunately a lot of these agents has very little knowledge on funds and funds performance. Just ask them what fund they are proposing and ask them to show you the factsheet. Don't be surprise that most of the time, the fund's since inception return or historical past 10 years performance is far off from the 8.0% return that they preach.

 

[Shion]

It's not just the mortality charges. There's also administrative charges ($60/yr for Prudential) and fund management charges (something like 2% per year, charged whether you make money or not). And when they sell your units to pay the mortality/admin charges, there's a bid-ask spread.

Thanks for the additional information here.

 

[Shion]

Very often an agent selling ILP will use the 8% column to preach his plan. Unfortunately a lot of these agents has very little knowledge on funds and funds performance. Just ask them what fund they are proposing and ask them to show you the factsheet. Don't be surprise that most of the time, the fund's since inception return or historical past 10 years performance is far off from the 8.0% return that they preach.

The last time I went into the various websites to check on the funds, the amount of underperforming funds is quite significant.

And yes, most, if not all, will talk about 8% only.