Investment Protection

No. List of FAQ’s on Investment-Linked Insurance(ILP) 1. How does Investment-Linked Insurance work? An Investment-Linked Insurance policy offers you both investment and protection elements. The premiums that you pay provide you with life insurance cover and part of the premiums will also be invested in specific investment funds of your choice. As a policyholder, you can choose how to allocate your insurance premiums towards protection and investment subject to certain constraints. The insurance coverage provided could include death benefit, disability and critical illness. The investment fund is divided into units of equal value. The prices of these units are published daily in the newspapers for you to track the value of your investments. 2. What are the risks of purchasing ILPs? When you purchase an ILP, the investment risk will be borne entirely by you. The performance of the funds is not guaranteed and the price of the units can rise or fall. If a fund does not perform well, the value of your investments may be adversely affected. Since an investment-linked plan is linked to the unit price of an investment fund (managed by the insurance company), the total value of the plan fluctuates with the movements in the unit price. When the unit price falls, the value of your investment will also reduce and vice versa. You may realise a gain or loss when you sell your units. You may even get less than what you have invested. 3. Are investment returns from ILPs guaranteed? No, the return on an investment-linked fund is not guaranteed. This is because the price of the units that you hold may rise or fall depending on the market value of the investment. 4. What are the differences between par policies; non-par policies and ILPs? A 'participating' fund is made up of the premiums that policyholders pay for 'participating' policies. A 'participating' policy participates in allocations made from the o. List of FAQ’s on Investment-Linked Insurance(ILP) participating fund. The share of the profits is paid in the form of 'bonus' or 'dividend'. Bonuses or dividends are not guaranteed as they depend on how the fund's investments are performing, how many claims are made on the fund, expenses incurred, the smoothening of investment returns etc. A 'non-participating' fund is made up of premiums from 'non-participating' policies. A 'non-participating' policy is not entitled to any profits the fund may make but only to the guaranteed benefits of the non-participating policy. An 'investment-linked' fund pools together the premiums paid by investment-linked policies and invests in a portfolio of assets to achieve the fund's objective. The price of each unit in a fund depends on how the investments in that fund perform. The fund may be managed by the insurer or external fund manager(s). Talk to your financial adviser for greater clarity on the different types of policies before deciding on what best suits your financial situation and risk profile.