Wednesday, September 1, 2010

Scratching Your Head Over Investment-Linked Insurance?

If you're in the market for life insurance, you would have inevitably bumped into something called investment-linked insurance. As with lots of things in life, the benefit or detriment accrued from something is pretty much dependent on how you use it. 

I cannot stress enough the importance of an investment-linked plan that's tailor made to your needs. A badly suited plan will be a pain in the you-know-where. In the next few posts, I will focus on investment-linked insurance. 

Investment-linked insurance is, as the title would suggest, a plan that includes an element of protection and also investment. Investment in this case means unit trust funds. The choice of fund is up to you and the mix of funds can be changed at anytime. 

Investment-linked Insurance: How It Works
  1. The money you pay as premiums is used to purchase units in Unit Trust Funds. 
  2. The insurance charges are then paid by selling the number of units that is needed to cover the charge.
  3. The rest of your units will remain and continue to grow in the Unit Trust Fund.
When you pay your next insurance premium this 3 step process will repeat.

2 comments:

  1. What exactly does 2 mean? How do I know what my "insurance charges" are a month?

    ReplyDelete
  2. Ask your insurance consultant to show you the insurance charges. Companies usually will send you a statement documenting your charges and investment values. With investment-linked insurance these charges are very transparent but it's still best to ask an insurance consultant to explain the charges to you.

    ReplyDelete