What is Protection Linked Plan (“PLP”)? Compared with traditional ILAS and funds

Protection Linked Plan (“PLP”) is a new type of investment-linked life insurance product that aims to provide an investment-linked assurance scheme (“ILAS”) with a high level of death benefit component to the life insured before the age of 65.

The Insurance Authority and the industry have introduced this type of ILAS in recent years, with the advantage of providing consumers with a choice of ILAS with high life protection component and transparent fee structure. Thereby encouraging the younger generation to start retirement planning as early as possible.

Table of contents (click to go to the relevant paragraph)

• The difference between PLP and traditional ILAS
• The advantage of PLP? High level of death benefit
• Investment components and options
• Learn more about fees and charges
• Policy value and fund performance

 

Comparing PLP and traditional ILAS

Protection Linked Plan (“PLP”), is like traditional ILAS that both are long-term insurance products which combine life protection and investment, however the difference lies in the death benefit:

• The death benefit of traditional ILAS is 105% of the "account value" in general,
• PLP must provide a minimum of 150% of the “total premiums payable” (equivalent to the "sum insured") as death benefit before the life insured reaches the age of 65,
• Therefore, the "sum insured" and death benefit of PLP are higher than traditional ILAS.

 

High level of death benefit

The Insurance Authority has set a “fixed level of death benefit” for PLP, which is either 105% of the “account value” or the “sum insured,” whichever is higher as the death benefit before the age of 65. The PLP available in the market offers different levels of “sum insured”: 150%, 200% or 250% of the “total premiums payable” as the death benefit before the age of 65.

 

Young individuals shoulder greater responsibilities when building their careers and families, including household expenses, children's education, and retirement planning. Their need for life insurance protection and wealth accumulation only increases, rather than decreases.

Zurich Life Insurance (“Zurich”) understands the needs of young individuals, particularly during the stage of their children's growth when unexpected situations may arise. PLP allows customers to choose different levels of death benefit options and “sum insured” to fit various life stages. It also offers increased death benefit protection before the age of 65, assisting the insured in meeting their family's needs and achieving wealth accumulation goals. After the age of 65, PLP no longer provides high-value life insurance coverage, and the death benefit reduces to 105% of the "account value." However, regardless of the investment performance of the underlying funds, the minimum death benefit will not be less than 100% of the "total premiums paid" until the age of 100.

 

Investment components and choices

Consumers are free to choose the investment choices offered under the Protection Linked Plan (“PLP”) and traditional ILAS, which correspond to the funds managed by the fund company. The investment choices available under PLP are all SFC-authorized funds, including at least one ESG (Environmental, Social and Governance) fund. This ensures that the provided investment choices are regulated and safeguarded for investors.

Investment portfolio

In other words, investors have the flexibility to choose their own investment choices based on their risk tolerance, personal needs, and preferences. They can invest in various markets, asset classes, and industries globally, creating a suitable investment portfolio. Recently, insurance companies have also included popular ESG funds with cash distribution, allowing investors to diversify their investments and manage risks effectively.

Compared to investing in funds directly, there are no subscription fees charged for the investment choices under PLP and traditional ILAS. The premiums paid are deducted from the policy's fees and charges and directly invested in the funds corresponding to the selected investment choices.

Additionally, the insurance company provides monthly investment performance summary, offering insights of the investment objectives, policies, and performance of the underlying funds. This helps investors make informed decisions and consider switching investment choices over time to align with their portfolio and risk profile. Generally, both PLP and traditional ILAS do not incur fund switching fees or redemption charges. Customers can switch their investment choices for free at any time through the online platform of the insurance company, allowing for flexibility and autonomy.

Zurich offers a wide range of investment choices, including equity, bond, money market and multi-asset investments etc.. As part of our commitment to sustainability, we have also incorporated SFC-authorized ESG funds, allowing investors to customize their investment portfolios accordingly.

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Fees and charges

Regulators require PLP to have a simple and transparent fee structure, which ensures consumers to have a clear understanding of all fees and charges associated with the policy, as well as the impact of ongoing fees on their investment returns.

It is important to note that the “cost of insurance” (COI) may increase significantly with the life insured ages. Also, there may be fees and charges incurred for the termination and withdrawal of the “policy value” under relevant conditions.

“Policy value” and fund performance

The performance and return of the underlying funds are affected by investment risks and market fluctuations, which in turn increase or decrease the "account value" and death benefit under the policy. As the policy value is not guaranteed, returns will be reduced by deducting various ongoing fees and charges from the policy.