Already holding an ILP: statements, premium holidays, partial withdrawals, reducing cover, surrender and replacement

Reviewing an investment-linked policy (ILP) you already hold means using the policy statement and contract terms to work out what the policy has already cost, what it still costs each year and what continuing to hold it will buy you, and then comparing seven courses of action: continuing premiums, taking a premium holiday, reducing the sum assured, topping up, making a partial withdrawal, surrendering and replacing. This page sets out the order of review and a framework for the numbers. It does not tell you whether to keep or surrender: for the same policy, the answer can be opposite for people of different ages, health and cash needs.

Step one: understand six figures on the statement

Regular-premium ILPs, and protection-oriented single-premium ILPs that meet the 150% threshold, receive a policyholder statement once a year; other ILPs generally receive one monthly (MAS Notice 307). The statement shows unit values, transactions during the period and the charges paid by selling units (LIA guide).

If you cannot find last year's statement, you can ask the insurer for a copy.

Step two: separate three accounts — what has been spent, what is being spent each year, and what will be spent

Already spent: premium charges or surrender charges in the early years are sunk costs (see the charge structure examples in ILP charges). When deciding whether to keep the policy, charges already paid should not drive the decision; what matters is costs and benefits from today onwards. Whether the surrender-charge period has ended makes a big difference to the loss from surrendering now.

Spent each year: insurance charges and policy fees are paid monthly by selling units, and insurance charges usually rise with age (MoneySense, 28 Sep 2026). One ratio helps track the trend: insurance and other charges paid by selling units over the past year ÷ account value at the start of the year. A hypothetical illustration (the figures are invented): with an account value of S$40,000 and S$1,600 of charges deducted in a year, the ratio is 4%. Ignoring new premiums, the unit price (already net of fund charges) has to rise by about 4% a year just to offset the deductions; in terms of the gross return on the underlying assets, you also need to add the sub-fund's expense ratio. A ratio that rises year after year is a signal that calls for a closer review.

Still to be spent: premiums over the remaining premium term, insurance charges that will keep rising with age, and (if you replace the policy) a new charge period starting again on the new policy.

Seven courses of action: effects on cost and cover

Actual charges are as stated in the Product Summary and the policy contract.

Premium holidays and reducing the sum assured: two ways to keep a policy in force, and their costs

Many regular-premium ILPs allow premiums to be suspended without ending the policy, but existing units are sold during that time to pay insurance and other charges, which may reduce the cash value over the long term, and taking the holiday may itself incur a fee (LIA guide). A premium holiday trades existing units for time; if markets fall during it, units are used up faster.

When the account value is not enough to pay insurance charges, the LIA guide gives two options: top up premiums, or reduce the sum assured. Reducing the sum assured can extend the life of the policy, because insurance charges are calculated on the sum assured (or sum at risk), so a lower sum assured means fewer units sold each month; the trade-off is less cover, and restoring it later usually requires fresh underwriting.

Before deciding, you can ask the insurer for a written projection showing when units are expected to run out under several assumed returns, both at the current sum assured and after a reduction.

Partial withdrawal and full surrender: inside and outside the surrender-charge period

Both a partial withdrawal and a full surrender sell units for cash. They differ in three ways.

First, charges. Back-end-charging ILPs levy a surrender charge and partial withdrawal charge for a set period, after which these usually no longer apply (LIA guide), so the amount you get back can differ greatly depending on whether you are inside or outside that period.

Second, the effect on the death benefit. In a published product example, where the death benefit is based on 101% of premiums paid, 101% of cumulative partial withdrawals (including partial withdrawal charges) is deducted before taking the higher of that figure and the account value (OCBC / Great Eastern product page, 6 Aug 2025; an example only, refer to your own Product Summary). In other words, a partial withdrawal can reduce not only the account value but also the base for your cover.

Third, where the money goes. For a policy bought with CPF savings, surrender proceeds usually have to be returned to the CPF account, subject to CPF Board rules; where tax is involved, cross-border readers should obtain professional advice in their own jurisdiction.

Replacing a policy: regulatory requirements and common misjudgements

"Swapping an old ILP for a new one" is the option that calls for the most caution. MAS imposes two layers of written requirements:

1. For the insurer: paragraph 7 of Notice 318 requires a warning at the proposal stage about the disadvantages of replacing an existing policy, and a question on the proposal form asking whether the application is a replacement; paragraph 8 requires that, where it is a replacement, the new insurer write to explain the disadvantages and undertake to refund premiums paid on the new policy if the customer decides not to replace.
2. For the adviser: paragraph 42 of Notice FAA-N16 prohibits advisers from recommending a switch of investment products in a way that is detrimental to the client, and MAS will consider factors such as termination penalties, transaction costs and whether the new product offers the same or lower benefits at a higher cost; paragraph 44 requires written disclosure of all costs involved in the switch.

Common misjudgements include comparing only "illustrated returns" while ignoring the new charge period on the new policy; ignoring the effect of changes in age and health on insurance charges and underwriting; and ending the old policy before the new one has cleared underwriting, leaving a gap in cover.

If you believe you were misled: complaints route and deadlines

Raise any complaint first with the insurer or the adviser; if you cannot reach agreement, you can file with the Financial Industry Disputes Resolution Centre (FIDReC) free of charge within six months of the firm's final reply, with an award limit of S$150,000 per claim (from 1 Jul 2024). The full rules are in ILP regulation. For context, FIDReC received 211 ILP-related cases in 2024, about 0.1% of ILPs sold that year, with a median claim amount of S$7,200 (MAS written parliamentary reply, 25 Sep 2025). Before complaining, gather the FNA, the CKA record, the Product Summary, the policy illustration and all annual statements. More background is in Common criticisms of ILPs.

Review questions, and when to seek a second opinion

1. Have you found all six figures, and has the running-cost ratio risen or fallen over the past three years?
2. Is the policy still within the surrender-charge period, and if so, for how many more years?
3. Does your original purpose in buying (protection, investment or both) still hold today?
4. If you were deciding today, would you buy the same sum assured and sub-fund mix?
5. If you reduce the sum assured, can the resulting protection gap be filled by other policies?
6. If you are considering a replacement, have you received a written cost comparison and the warning letter required under Notice 318?

Where large sums or health underwriting are involved, or you have doubts about how the policy was sold, it is worth seeking a second opinion before an irreversible decision such as surrender or replacement. Charge details are in ILP charges, and routine rebalancing in Regular investing and rebalancing. If you would like this interpreted for your own circumstances, you can register your needs through the contact options on this site.