An Investment-Linked Assurance Scheme (ILAS) is a long term insurance policy providing policyholder life insurance cover plus investment options (of which each investment option usually solely links to an SFC-authorized fund). Consumers can choose ILAS products with different life protection level according to their needs, and investment options based on their investment objective and risk tolerance. In terms of product nature, it is similar to investing in funds via an asset-based fund platform plus buying a term life insurance policy (depends on the life protection level of the ILAS policy).
What are the comparable alternatives for different types of ILAS products?
For low protection ILAS products like a Pure 105% policy which only provides a death benefit of 105% of account value, given the minimal insurance protection, it is more akin to an asset-based fund platform which has similar investment and cost structure to a typical low protection ILAS product.
As for high protection ILAS products like a Protection Linked Plan, an asset-based fund platform (in respect of the investment in funds) and a term life product (in respect of the insurance protection) are the appropriate alternatives.
What is an asset-based fund platform?
An asset-based fund platform has the following investment and cost structure:
- Ongoing account fees calculated based on account balance,
- Range of fund choices from different fund houses with low entry size for selection,
- No fund subscription, switching and redemption fees.
What is a term life insurance policy?
A term life insurance policy is a pure protection policy without any saving or investment elements that pays a lump sum upon death of the insured if it occurs within a fixed period of time. That means the premiums are payable for the insurance coverage.
Shop around before choosing an ILAS product
When considering an ILAS product, you can compare it with comparable alternative products to see which solution is more suitable to your personal circumstances and needs.
|
ILAS policies |
Comparable alternative products |
||
|
In respect of the investment in funds |
In respect of the insurance protection |
||
|
Product nature |
An insurance policy offering both life insurance protection and investment options. |
Invest in funds via an asset-based fund platform. Funds are purely investment products and have no insurance element. |
Buy a term life insurance policy (depends on the life protection level of the ILAS policy). A term life insurance policy is a pure protection policy without any saving or investment elements, and it does not generate any cash value. |
|
Investment/Policy term |
Long term in general. Early surrender may be subject to surrender charge and incur significant losses. |
Investors can decide the investment period themselves. But some fund platforms may charge exit fees. |
Policyholders can decide the policy term for the life coverage. |
|
Ownership over assets |
All premiums paid towards the ILAS policies, and any investments made by the insurance companies in the underlying/reference funds, will become and remain the assets of the insurance companies. Policyholders do not have any rights or ownership over any of those assets. Their recourse is against the insurance companies only. |
Investors own the funds. |
N/A |
|
Estate planning |
The designated beneficiary would be entitled to a death benefit of the insured. ILAS policies can be used for estate planning purpose. |
If an investor passes away, the funds will become his/her estate. |
Policyholders can designate beneficiaries for the term life insurance policies. |
|
Cooling-off period |
ILAS policies offer a cooling-off period during which investors can cancel the policy to get back their original investments subject to market value adjustment. |
There is no post-sale cooling-off period for funds. |
Policyholders can cancel the policy within the cooling-off period and obtain refund of 100% of the premiums paid. |
