Frequently Asked Questions
Savings & Investment
You need to identify your investment objectives and understand your investment risk profile. This will facilitate your decision making process.
Insurance policies with an investment element can provide varying rewards and risks. Before signing on the dotted line, you need to be fully aware of the policy’s benefits and risks. Do take your time to fully understand the nature of the product you are purchasing.
It is prudent to check if there are alternative products that offer similar benefits so do evaluate the pros and cons of each option. You are encouraged to consult a professional FA representative for more information and advice to help you make an informed purchase decision.
What is also important is to take stock of how much you can afford to invest. Do not commit to investments beyond your means, especially if the product requires you to make regular payments or to keep your principal invested over a minimum period.
There are many ways to set aside money for your child’s education. An endowment policy is an option you can consider.
It is a type of life insurance policy with a specific maturity date. Given this feature, you can choose a policy term such that the policy matures at the time when your child enters university. The policy also typically gives a stable return, which grows in value over the years and may potentially offer higher returns than bank deposit interest rates. Hence, it acts as a good savings tool for parents who need to save up for their child’s education.
With an endowment policy, you have the peace of mind in knowing that should the unfortunate premature death or disability happen to you during that period, the sum insured will still be paid to your beneficiaries.
You can consider investment-linked insurance plans (ILPs). They offer a combination of financial protection and investment, allowing you the flexibility and choice as to how your premiums are invested.
Typically, the policy will provide you with a choice of funds in which you may invest in, and also the flexibility to switch between different funds during the life of the policy.
In an ILP, the policy value is linked to the prevailing value of the units and the price of your units depends on how the investments in the fund perform. The proceeds you receive from an ILP will depend on the price of the units at the time when you cash it in or die.
In the event of an unforeseen death, injury or disability, the policy will provide the sum assured so you can take comfort to know that your family is protected from sudden financial loss.
An ILP offers varying degrees of rewards and risks. As such, it is important to monitor the performance of the funds you have invested in, consult your FA representative regularly and consider your own risk appetite and investment horizon.
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 cash and maturity values will be adversely affected.
Most single premium ILPs offer lower insurance coverage levels and consequently have lower insurance coverage charges as compared with regular premium ILPs. For regular premium ILPs, the scale of insurance coverage charges is not usually guaranteed and may be adjusted by insurers (within any maximum limits stated in the Policy Contract).
As the risk of death, disability and illness generally increases with age, insurance coverage charges typically increase as you grow older. For most regular premium ILPs, insurance coverage charges are paid through the sale of units. As you get older, it is possible that a combination of high insurance protection and a poorly performing fund may result in the value of the units being inadequate to meet insurance coverage charges for the level of coverage provided by your plan.
Review your plan regularly, assess the benefits and costs, and discuss with your FA representative if changes are needed to ensure that the plan meets your changing needs.
This depends on the performance of your chosen fund. The returns are not guaranteed and you will have to bear the investment losses if the funds perform poorly. You should also note that the past returns of a fund are not necessarily indicative of the future performance of the fund.
You would normally have the flexibility to move part or all of your money from one fund to another. This is known as fund switching. When selecting or switching investment-linked fund(s), it is important that you take your risk profile, investment objective and the period of time you can stay invested into consideration.
A 'participating' fund is made up of the premiums that policyholders pay for 'participating' policies. A 'participating' policy participates in allocations made from the 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, and any expenses incurred.
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 fulfill the obligations of non-participating policies.
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 type of policies before deciding on what best suits your financial situation and risk profile.