Cancel a high cost ILP

Many people were shocked when they learn that the investment-linked policy (ILP) that they bought from the insurance agent (who is usually their friend) can take away up to 2 years of their savings.

They feel let down by their friend, who offered a policy that give so poor value, and lock them up for a lifetime.

What can they do?

It is best to terminate the policy early (say within the first two years) and take a loss. As the high cost is usually spread over the the first five years, the policyholder will only bear part of the full cost by early termination. The policyholder can save on the high charges on the future premiums.

What is the alternative?

a) Save in a bank account for the time being. When you accumulate more than $3,000, you can buy 1,000 shares of STI ETF or other low cost ETFs on the Singapore Exchange.

b) Buy a low cost investment fund with no upfront spread, and low expense ratio. This will be available soon.