Once in a while I get some feedback from clients that they have been sold inappropriate products – either products do not meet their needs or inferior products.

Take for instance, the regular premium ILP. The product is an essentially a combination of 1 year renewable term PLUS investment. Since the life insurer does not provide value add service by managing the risk of the underlying investment, I do not see why would anyone wants to buy such a product. It will be more straightforward just to buy a separate term insurance and invest the difference (which is what an ILP does). Here are some “advantages” which an adviser usually uses when proposing a regular premium ILP:

1. “A regular premium ILP has a very low cost insurance charges when a person is young”. My response: “A standalone term insurance is also very low cost”
2. “A regular premium ILP allows high long term gains.” My response: “Future return is not guaranteed and potential long term gains can also be possible using unit trusts.”
3. “A regular premium ILP allows a person to go on premium holiday.” My response: “If you buy term and invest the difference, you can do likewise because you can do your own ‘premium holiday” by stopping the investment and selling units to pay for the term”
4. “A regular premium ILP allows a person to increase his coverage.” My response: “No big deal, as long as a person is insurable, he can also ‘top-up’ his term coverage by buying another term policy.”

Therefore, I would say that a regular premium ILP is considered an “inferior product.” because it can be implemented using plain vanilla term and separate unit trusts.