Personal Finance Term
ILP
Investment-Linked Policy
A life insurance or takaful plan that combines protection with investment, where part of your premium buys insurance cover and the rest is invested in funds you choose. The most common life product sold in Malaysia.
In an ILP, your premium is split: insurance charges (which rise as you age) pay for the protection rider, and the balance buys units in investment-linked funds ranging from conservative bond funds to aggressive equity funds. The cash value depends on fund performance, and crucially, in later years the rising cost of insurance can eat into your invested units — a policy can lapse if the unit value runs out, so periodic reviews matter.
ILPs offer flexibility — you can adjust your sum assured, add riders like medical and critical illness, and top up investments — but the layered fees (insurance charges, fund management fees, policy fees) make them more expensive than buying term cover and investing separately. They suit people who want one bundled plan and value convenience over squeezing out the lowest cost. Always ask for the full charges illustration before signing.