How to review an investment-linked policy you’ve held for years

Begin with the question—not the surrender form

People usually revisit an older investment-linked policy because its value is disappointing, the premium feels heavy, the funds have not been reviewed or they no longer remember why it was bought. Start with that concern.

An old policy is not automatically good because early charges have already been paid, and it is not automatically bad because the current value is below total premiums. The useful question is what the policy does for you now and what each available choice changes from this point onward.

Separate the policy into four parts

MoneySense notes that ILP units may be sold to meet insurance and policy charges. Insurance charges commonly rise with age, so protection and investment outcomes need to be reviewed together.

What your statement can—and cannot—tell you

Your annual statement should show units, transactions, charges and current value. It may not, by itself, answer whether your return is satisfactory or whether the policy can sustain its benefits.

“Current value minus total premiums” ignores when premiums and withdrawals occurred. For a meaningful performance review, reconstruct the dated cash flows and calculate a money-weighted return. Then compare it with an appropriate benchmark only after accounting for the policy’s actual holdings, insurance benefits, costs and currency exposure.

An S&P 500 chart is an index illustration, not your policy return. Read the Invest Now or Wait guide for the limits of historical index examples.

Run a policy-sustainability check

Ask for the charges applicable to your policy—not a current product brochure. Depending on the contract, these can include insurance, administration, fund management, bid-offer, switching and surrender charges.

A premium holiday is not necessarily a charge holiday. If units continue to be sold while no new premium is paid, an extended break, weak fund performance or rising insurance costs can reduce the policy value. Ask what could happen under less favourable assumptions and whether a top-up or benefit adjustment might later be required.

Review the portfolio without chasing the latest winner

Check each fund’s objective, underlying assets, fees and risks. Look for unintended concentration by country, sector, company or investment style, as well as overlap between funds.

A fund switch changes future exposure; it does not repair past performance. Compare the proposed allocation with your current goal and withdrawal date. Confirm any switching charge and remember that recent outperformance does not establish future suitability.

Compare keep, adjust and exit from today forward

Use the same starting value, timeframe and assumptions for all three. Do not compare an existing policy’s surrender value with a new illustration’s projected maturity value. If affordability is the concern, use the insurance budget review before reducing cover.

Five figures to request before deciding

1. Current policy value and current surrender value.
2. Total benefits and the insurance charges deducted in the latest period.
3. All other current policy and fund charges.
4. Dated premiums, top-ups, withdrawals and premium breaks.
5. An illustration or explanation of how the policy may operate if premiums, benefits or returns change.

Figures and projections do not remove uncertainty, but they make the trade-offs visible. Any recommendation should reflect your actual contract, current needs and ability to bear investment loss.