Understanding investment-linked assurance schemes
An investment-linked assurance scheme (ILAS) has the following typical features:
- it is a life insurance policy issued by an insurance company;
- it provides the policyholder with life insurance cover plus investment options (usually funds);
- its policy value is determined by the insurance company based on the performance of the “underlying or reference funds*”; and
- the insurance company owns the underlying assets of an ILAS product and policyholders do not; the policyholders have the ownership of the policy.
ILAS products are generally designed for consumers who have a long-term investment horizon and a dual objective of investment and estate planning, intend and are able to pay the premiums for the whole of the policy term and understand that their death benefits are subject to investment risks.
ILAS products may vary in the following areas:
- the form of death benefit eg "high protection", "capital preservation upon death" and "pure 105 (ie 105% of policy value)";
- the structure of fees and charges eg at policy level, and/or underlying/reference funds level; and/or
- the mode of contribution eg single, regular or both.
Buying an ILAS product is not the same as investing in a fund. It is important for consumers to understand the product’s features and risks and know how to differentiate an ILAS from other financial products.
To decide whether a particular ILAS product suits you, you should consider, among other things,
- whether the nature and features of ILAS products and insurance cover will be suitable for and adequate in meeting your needs
- whether the ILAS' policy term aligns with your investment horizon
- whether you are able or intend to make contributions for the whole of your chosen premium term particularly if the ILAS you choose has regular premium payment obligations
- whether the total fees and charges are acceptable to you especially if you may need to surrender the policy early
* The term "underlying fund(s)" is used by the ILAS issuer in the event that it has disclosed in the offering document that it will be investing the net premium received from the ILAS customers into the funds corresponding to the investment options as selected by the ILAS customers for such ILAS issuer's asset liability management. Otherwise, the ILAS issuer adopts the term "reference fund(s)".