Over the years, insurers have progressively improved Investment linked plans (ILP) from the traditional ILP to what we commonly term now as 101 ILP.
101 Investment-Linked Plan (101 ILP) is a specific type of Investment-Linked Plan designed to prioritize wealth accumulation over insurance coverage, distinguishing it from traditional ILPs (which will have higher allocation to insurance coverage, lower investment allocation, and associated with high insurance charges).
A 101 ILP is an investment-focused ILP with minimal insurance coverage, typically offering a death benefit of 101% of the total premiums paid or the account value, whichever is higher. This structure allocates nearly all premiums to investments, making it more akin to a pure investment product while retaining a nominal insurance component. The term "101" refers to the 101% death benefit, which provides a slight buffer to ensure beneficiaries receive at least the invested amount upon the policyholder’s death, subject to market conditions.
-High Investment Allocation: 100% of premiums are invested into chosen sub-funds from day one, with no deductions for insurance costs in some plans.
-Minimal Insurance: Offers basic coverage (e.g., death benefit of 101% of premiums paid), making it less suitable for those needing significant protection.
-Access to Exclusive Funds: Some 101 ILPs provide access to restricted or accredited investor funds (e.g., Fundsmith Equity fund, Baillie Gifford), which may not be available through retail unit trusts.
-Bonuses: Many plans offer upfront bonuses (up to 3x first-year investment) or loyalty bonuses to boost returns and offset the charges.
-Estate Planning: The insurance wrapper allows nomination of beneficiaries, bypassing probate or will administration for smoother wealth transfer
-Flexibility: Options for ad-hoc top-ups, withdrawals (often from the 3rd year), premium holiday and fund switching, sometimes with no medical underwriting required.
-Early termination penalty will ‘force’ the policyholder to stay invested for the agreed period
| |
101 ILP |
Traditional ILP |
Unit Trust |
| Structure |
Investment focused with minimal insurance (101% death benefit) |
Combines investment and insurance (Death, TPD and Critical illness) |
Pure investement, no insurance |
| Insurance Coverage |
101% of premiums paid or account value |
Comprehensive Death, TPD and critical illness coverage |
None |
| Investment Allocation |
100% of premium invested from day 1 |
Partial allocation after insurance fees. (Typically starts at 20% at first year and progressively increases) |
100% invested after the upfront fees (up to 5%) |
| Cost |
Lower insurance charges; includes Fund management fees, adminstrative fees. Start up adn loyalty bonus is givento offset cost |
Higher cost associated with insurance charges, admin fees. |
Fund management fees, Initial sales charges, Wrap fees (for unlimited switching), Platform fees |
| Type of accessibility to funds |
Includes exclusives funds (Eg Accredited investor funds like Fundsmith Equity Fund, Baillie Gifford) |
Limited to insurance sub funds |
Wide range of retail funds |
| Flexibility |
Top ups, withdrawals, fund switching |
Flexibility maybe tied to insurance policy. |
High flexibility with no locked in period. |
| Liquidity |
Withdrawals are possible, as early as after 3rd year |
Low with high surrender penalty early in the policy |
High, daily redemptions are available |
| Estate planning |
Beneficiary nomination bypass the probate |
Beneficiary nomination bypass the probate |
No estate planning feature, it is subject to probate |
| Suitability |
For investors looking for growth or passive income with minimal insurance and estate planning benefits |
For investors needing both insurance coverage and investment with lower starting budget. |
For investors looking for high liquidity |
101 ILP can now offer 100% investment allocation, access to exclusive funds, and estate planning benefits with minimal insurance. It’s ideal for long-term investors comfortable with market risks and seeking legacy options. However, if you prioritize pure investment with low cost and high liquidity, Unit Trust may be more suited for you. Speak to our financial advisors to start your investment journey.
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