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Whether an ILAS product or direct investment in a fund is an appropriate choice depends on your financial objectives and circumstances. It is important, however, to know the differences.

ILAS Funds
Your status as a consumer
You are a policyholder of an insurance contract and have contractual rights and obligations vis-a-vis the insurance company under the contract.
Specified beneficiary(ies) would be entitled to a death benefit linked to the performance of the underlying/reference funds corresponding to your selected investment options.
You are a unitholder/shareholder of the fund.
You have proprietary interest in the fund which will become part of your estate if you pass away.
Ownership of underlying assets
The insurance company, being the ILAS issuer, owns the underlying assets.
You do not have any right over the underlying/reference funds. Any recourse is against the insurance company. You have a legal claim over the value of the policy.
You own the fund which, in turn, owns the underlying assets of the fund. Your ownership right is in proportion to the units held by you to the total number of units in the fund.
You may lay claims to the fund units you hold.
Segregation/independent custody of underlying investments
While the insurance company owns the underlying assets, these assets are, by law, kept in a separate account and can only be used to meet the claims of ILAS' policyholders or beneficiaries. Such assets are not maintained by independent trustees/custodians at arm's length from the insurance company. Underlying investments of a fund are generally held by an independent trustee/custodian on behalf of the fund.
Investment term
An ILAS is designed for people with a long-term investment horizon and the ability to afford payment of the entire premium payment term. The investment term is more flexible.
Determination of investment return
The return in respect of the investment options is determined by the insurance company pursuant to the policy provisions.
An ILAS' performance may or may not make reference to the performance of the underlying/reference funds corresponding to the investment options you select, depending on the terms and conditions of the ILAS.
The return is generally based on the fund's performance.
A fund's performance is usually calculated by reference to the net asset value of all underlying investments of the fund.
Typical fees and charges
Policy level:
  • Initial charge (where applicable)
  • Surrender charge
  • Withdrawal charge
  • Administration/management charge
  • Insurance charge (where applicable)
  • Investment options charges such as management fee and bid-offer spread (where applicable)
Underlying/reference funds level:
  • Management fee
  • Performance fee (where applicable)
  • Switching charge (where applicable)
  • Trustee and custodian fee
Fund level:
  • Subscription fee
  • Management fee
  • Performance fee (where applicable)
  • Redemption fee (where applicable)
  • Switching charge (where applicable)
  • Bid-offer spread (where applicable)
  • Trustee and custodian fee
Key risks you may face
Policy level:
  • Credit risk of the insurance company
  • Early termination risk
Underlying/reference funds level:
  • Counterparty risk
  • Market risk
  • Management risk
  • Foreign exchange risk
  • Interest rate risk

 

Fund level:
  • Counterparty risk
  • Market risk
  • Management risk
  • Foreign exchange risk
  • Interest rate risk
Penalty for early surrender/redemption
Charge or penalty may be incurred upon early surrender, partial withdrawal, termination of the policy or suspension of/reduction in premium. This may result in significant or total loss in principal and other benefits under the policy e.g. death benefits and bonuses, especially in the initial years of the policy. Some funds may charge a redemption fee, which is a certain percentage of your redemption amount.
Cooling-off period
You are entitled to a cooling-off period during which you may cancel the policy and recover your premium paid (subject to market value adjustment, if any). There is no post-sale cooling-off period for funds.