What to look for in an investment-linked policy

There is an article in the Today paper on what to look for in an investment linked policy. It is written by the training manager of an international insurance company.

The article advised consumers to consider the financial objectives, to look for the suitable funds and consider the charges. There are motherhood statements, but avoid the essential facts.

Over 100,000 consumers (my guess) buy an investment linked policy each year and do not realize that they are making a bad investment. Many of these regular premium policies give a reduction of yield of up to 4%.  If the underlying funds earn an average yield of 6%, the consumer gets a net yield of only 2% per annum. This is hardly enough to cover inflation.

If the consumer buys  a term insurance policy and invest the rest of the savings in a low cost fund, the reduction in yield is likely to be only 1%.This will allow the consumer to enjoy a net yield of 5% p.a. The difference in yield between 2% and 5%, over a period of 35 years is a lot of money. It can amount to several hundred thousand dollars!

This is explained in my book, Practical Guide on Financial Planning.  You can also attend the educational talk organised by FISCA (http://easyapps.sg/assn/Org/Event.aspx?id=5)