Is Investment-Linked Insurance a Sneaky Trap?

[chretien22]

Plan : A-Lifelink-i

Issue Date : July, 2019

Current Age : 32

Coverage Amount:

a) A-lifelink-i : RM52k

b) A-Plus Disability Care : RM52k

c) A-Plus CriticalCare-i: RM52k

d) Aplus Med-i : Annual medical limit balance : RM137,500

e) A plus medBooster-i : RM1.25 mil

Monthly Payment: RM 325 (I paid every quarter ie RM975)

Total fund value: Close to RM4000.

I just recently realized that my policy is an investment-linked one, and upon reviewing the details, I found out that my fund is A-Dana Balanced, with the percentage of allocation increasing each year, starting from 40%.

I've learned that I can reduce my allocation to as low as 5%, but I'm unsure if I should. When I initially signed up for this insurance, I didn't have much knowledge or concern about investments. However, after reading more, I've become anxious about whether I made the right choice. I've heard some opinions saying that investing through insurance might not be the best idea.

Now, I'm at a crossroads. Should I cancel the policy altogether, reduce the percentage of allocation, or perhaps explore other options? I don't want to regret my decision later when it might be too late.

p/s: ive edited to outline other coverage i can see in my policy

 

[sonia5555]

@chretien22 Investment-linked insurance plan is often used to offset or buffer any increase in price of the premium, or it could also be used to pay the premium in the event that the client is unable to pay (the company can deduct the payment from your investment instead). You can also withdraw the money in case of emergency. But that's pretty much it. It's not going to make you a rich person.

Also, I'd like to add that investment-linked plans are somewhat older if compared to the current standard in the industry. If you care about investment, then just get the newer and cheaper standalone insurance, and use the extra money for an actual investment product.

 

[lynq]

@sonia5555 Investment linked plans are NOT older. Majority of medical plans are still sold via IL plans now.

 

[scronk]

@chretien22 This looks like an AIA policy. A coverage of RM52,000 for life is pathetic for the premiums you're paying. You need to check your policy and see what is covered. You might have other riders added on.

 

[biblequestions]

@chretien22

https://www.reddit.com/r/MalaysianPF/comments/zlq1ui

All investment-linked insurance is terrible if you know how to calculate the time value of money and how to do simple investments (even EPF/ASB would be better). Of course a lot of people don't care, but good that you do!

I would cancel if there is no penalty, take out whatever you can, and try to buy a term plan instead. The mantra is always "buy term, invest the rest"

 

[mlorrainee]

@biblequestions Question. For term, we have to manually renew annually or will it auto renew annually? Do we have to do a health checkup annually for it?

 

[pressure]

@mlorrainee term has specific period. once it expire need to underwrite as fresh applicant. new health checkup. it's not auto renew, it has specific pre-determined period 10 years usually.

 

[biblequestions]

@mlorrainee Not an expert by any means (I'm lucky to have a very nice financial advisor and I throw everything insurance-related to her), but my understanding is that it will auto-renew for the length of the entire term. I didn't have to do a health check, but this depends on which plan as well as your age, medical history, etc. Usually young and healthy can just buy online

 

[chretien22]

@biblequestions So i can actually buy the term plan online via AIA website? no need through agent? I am not well-versed and knowledgeable when it comes to insurance. Appreciate ur help!

 

[biblequestions]

@chretien22 I'm definitely not good either compared to agents who do this every day. I would suggest talking to an agent. But if you want to start reading a little bit, these two articles were very useful for me: https://ringgitohringgit.com/money-...How_Investment-Linked_Insurance_is_structured and https://ringgitohringgit.com/personal-finance-community/financial-planner-in-malaysia/ .

 

[chretien22]

@biblequestions Thanks a lot man!

 

[lynq]

@biblequestions Also not a good advice. The OP actually has medical benefit attached. Now most of us wants medical coverage, probably until we die provided we can afford it. Getting a term plan does not solve the problem.

There is no penalty in cancelling your policy in 99% of the situation. What most people dont realise is when you buy any policy, there is high upfront cost, usually. You keep paying for this upfront cost if you keep buying new policy which eventually is not beneficial in the long run.

 

[biblequestions]

@lynq Nobody is saying don't get a medical plan....? The idea is getting a standalone medical card (probably about RM1k-1.5k) a year vs paying RM325 a month. You can read the links I've sent to see what is optimal vs what you have been doing.

Your idea of "oh I've already paid the commission for a while so I will keep on paying until I die" is also terrible logic and a classic example of sunk cost fallacy / throwing good money after the bad. RM1500 a year vs RM325 a month is an extra RM2400 a year.

FYI "high upfront costs" are only associated with ILPs because of the investment portion ie. fund management fees, etc. When you are paying ONLY for medical coverage, there are no "fees"/"high upfront costs" to be charged because there are no savings/cash value. So please don't spread misinformation

 

[blessedbeverly614]

@chretien22 300+/ month for life insurance? are you sure only lifelink there?

 

[chretien22]

@blessedbeverly614 That's the plan name. but if i look at the cert, the benefits are :

A-lifelink-i : RM52k

A-Plus Disability Care : RM52k

A-Plus CriticalCare-i: RM52k

Aplus Med-i : Annual medical limit balance : RM137,500

A plus medBooster-i : RM1.25 mil

Honestly i dont understand the aplus med i and a plus med booster.

 

[blessedbeverly614]

@chretien22 i think the plan is called Vitality

 

[chretien22]

@blessedbeverly614 Cant seem to find. in my policy cert & AIA apps, it shows as TKF A-LifeLink-i (New). But the coverage are as what ive listed

 

[lynq]

@blessedbeverly614 Vitality is not an insurance plan. Pay rm10 to aia every month and enjoy the vitality programme.

 

[blessedbeverly614]

@lynq you are right

 

[scronk]

@chretien22 The Med and MedBooster-I is your medical card. This is why you're paying RM325/mo. The Med is a considerably basic coverage plan which is why your agent added the booster as a rider.

Given your age and coverage, the amount you're paying looks about right for an ILP.