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Nature of ILPs: Combination of life insurance coverage and investment. Premiums contribute to both protection and investment units in professionally managed sub-funds.
Types of Plans: Typically classified as single premium, regular premium, or top-ups under the CPF Investment Scheme (CPFIS).

Premium Allocation: Policyholders can use CPF savings for premiums if the ILP is under CPFIS. Only single premium or recurrent single premium plans allowed since January 2001.
Existing Regular Premium Plans: Policies bought before 2001 can still use CPF for regular premiums.

A. Bonuses

Traditional policies offer reversionary and terminal bonuses based on insurer's profits, which once declared become guaranteed additions.
ILPs' values depend on chosen sub-fund performance.

B. Investment Returns

Traditional policies offer a minimum surrender value including declared bonuses.
ILPs do not guarantee returns; the investment risk lies with policy owners.

C. Transparency

Traditional policy premiums are bundled, with no clear breakdown of insurance vs. investment costs.
ILPs are transparent; policy owners see the allocation of premiums towards insurance, expenses, and investments in the Product Summary.

D. Investment Mandate

Traditional policies pool premiums into a Life Sub-fund primarily invested in fixed income.
ILPs invest according to individual sub-fund mandates, varying from 100% bonds to equities.

A. Bid and Offer Prices

Offer Price: Price at which units are purchased using premiums.
Bid Price: Price for cashing in units. Bid price is usually lower than the offer price due to bid-offer spread (initial sales charge).
Example: If offer price = S$2.45, and bid-offer spread = 5%, bid price = S$2.33.

B. Single Pricing vs. Bid-Offer Pricing

Single Pricing: Units bought and sold at a unique price.
Bid-Offer Pricing: Units bought at the offer price and sold at the bid price.

Single Premium ILPs: Full premium goes towards units after deductions.
Regular Premium ILPs: Percentages for allocations change over time based on fees.
- Ex: 15% in year 1, increasing gradually to 100% in subsequent years.

A. Charges Impact

Fees may include initial sales charges, sub-fund management fees, insurance charges, and policy fees, impacting the number of units bought.

B. Lapse and Reinstatement

A policy can lapse if premium payments do not cover insurance charges. Reinstatement clauses may provide for recovery under specific conditions.

Provide death coverage and may include disability, critical illness, or hospitalization benefits. Levels can adjust based on underwriting.
Costs associated with insurance coverage generally increase with age.
Premiums might remain unchanged even as coverage requirements increase over time.

Not Guaranteed: Returns depend on chosen sub-fund performance. Potential for higher gains with higher-risk investments but carries risks of loss.
Past performance does not guarantee future results.

Diversification: Access to a pooled investment portfolio managed professionally to mitigate risk.
Flexibility: Ability to adjust insurance coverage and premiums, take premium holidays, or add top-ups.
Dollar Cost Averaging: Regular investment mitigates market timing risk.
Professional Management: Managed by experts analyzing investments and trends.
Affordable Access: Small investors can access diverse investments without holding large capital amounts.
Choice of Sub-Funds: Options tailored to risk preference or financial goals.

Investment risk linked to market performance; potential fluctuations can lower cash values.
Charges associated with high insurance costs may reduce overall returns, particularly in older age.

Coverage: ILPs provide insurance as well as investment returns, while UTs focus solely on investments.
Reporting and Disclosure: ILPs have specific regulatory requirements that differ from UTs.

ILPs offer a blend of risk coverage and investment opportunities. It is crucial for policyholders to fully understand the financial implications, associated charges, and market risks involved before engaging with such products.