With the word investment become more and more a required part of our lives, some may be tempted to consider purchasing an Investment-Linked Life Insurance Policy (ILP), just because they carry some ‘investment’ in it. An any form of investment means higher returns isn’t it?
This is only my personal point of view and you should definitely come to your own conclusions after hearing the various arguments. But for me, you must fulfill these 2 conditions (AND condition, not OR!) before you should even think about purchasing an ILP.
1. You want higher returns from your money and are willing to stomach more risk to get it.
Ok, who doesn’t want higher returns for the money that they are forking out? That’s a redundant question. But the main issue is, whether are you willing to stomach more risk to get it? Can you live with the potential that you could get back even less than what you put in? As the saying goes, higher risk, higher rewards. Lower risk, lower rewards.
2. You are too lazy to research and find your own fund to invest in.
Wait! Investing your own money takes more than just finding the right fund! You need to track, monitor, adjust your portfolio, etc! Yes, that is true, if you are really serious about investments and have the time to do it. But whether you choose a fund to invest in on your own or the investment objectives of your ILP, you are basically making a one-time investment decision.
In both ways, you are trusting the respective fund managers to make the necessary adjustments in order to fetch the best outcomes. But if you choose your own fund to invest on your own, you have the freedom to cash out whenever you want. But with an ILP, cashing out will mean cancelling both the investment and the life protection element, which is not necessarily what you want. So if you can find the time to think about what investment objective to subscribe to in an ILP, then take the time to find your own funds to invest in on your own.
Therefore, only consider ILP if you fulfill both these conditions.