Single Premium Plan-ILP

From Financial Literacy Wiki

Under the single premium plan, you pay a lump sum premium to the company to purchase the policy. Minimum initial investment is $5000. A portion of your premium will be used to purchase protection. According to the guidelines of the Monetary Authority of Singapore, insurers are required to pay a minimum sum assured of 125% of the single premium. The rest of the premium, after deducting expenses such as administrative and promotion charges, profit for the insurance company, agent's commission, is invested in one or more unit trusts managed by the insurance company or a third party fund manager. Units are purchased at the prevailing offer price. Policy holders can choose how to allocate their investible premiums. They can also choose to switch funds but may incur a switching cost.

After the initial investment, the policy holder can choose to purchase more unit trusts, subject to minimum sum, that varies across companies. Single premium plans acquire immediate cash surrender value once the premium is paid. The surrender value is equivalent to the value of unit trusts in his accounts, calculated at prevailing rates.