101 ILPs and protection ILPs: how the two types differ, death benefit formulas and illustration rules

"101 ILP" and "protection ILP" divide ILPs by how much protection they contain. The first is mainly an investment: the death benefit is usually the higher of 101% of premiums paid and the account value, so the insurer carries very little sum at risk. The second allows a sum assured well above the account value, making life cover one of its main functions. The two differ in death benefit formula, where the charges fall, policy illustrations and statement rules, so confirm which type you are looking at before you buy.

Definitions: where the two types come from

The term "101 ILP" does not appear in regulatory documents. The LIA's documents on policy illustrations use "investment-oriented" and "protection-oriented", and distinguish single-premium and recurring single-premium ILPs by a 150% threshold for death and critical illness benefits. "101" comes from the death benefit design of one group of products, which pays the higher of 101% of premiums paid and the account value, and has since become shorthand for investment-oriented ILPs.

MoneySense points out that most single-premium ILPs offer less cover than regular-premium ILPs; the LIA suggests that people concerned only with protection consider term insurance.

Death benefit formulas compared

The death benefit formula determines how much "insurance" there really is. The table below shows common designs for each type; the exact formula is always as stated in the Product Summary and policy contract:

A public example: a retail regular-premium ILP sold through a bank channel (underwritten by Great Eastern Life) states on its product page that the death benefit is "101% of basic regular premiums paid plus 101% of single premium top-ups paid, less 101% of total partial withdrawals", or the account value if higher, less any policy debt (OCBC product page, information as at 6 August 2025). This is just one public example and does not mean all investment-oriented ILPs use 101%.

Two details are worth noting: partial withdrawals are usually deducted from the "premiums paid" base at the same percentage; and the 101% applies to premiums paid, not to premiums plus investment gains, so when the account value exceeds premiums paid, the death benefit equals the account value with no extra 1%.

Where the charges fall: how much do insurance charges weigh?

Insurance charges are usually calculated on the sum at risk, the part of the death benefit above the account value that the insurer has to pay out of its own funds (the basis of calculation is set out in the Product Summary). This explains the difference in charge structure between the two types:

• Investment-oriented ILPs have a very small sum at risk, so their charges come mainly from the premium charge and sub-fund management fees; compare them item by item with the charges of buying unit trusts directly.
• Protection ILPs have a large sum at risk, so insurance charges are one of the main costs and rise with age; the higher the sum assured, the more units are sold, and if sub-fund performance is poor, premiums may have to be topped up or the sum assured reduced to avoid a lapse (LIA guide).

The higher-of and additive designs also differ. Under a higher-of design, growth in the account value reduces the sum at risk and insurance charges fall with it; under an additive design, the sum at risk barely changes with the account value, so insurance charges weigh more heavily in later years, but the death benefit is also higher. Each charge is covered in detail in ILP charges.

Illustration rules: why investment-oriented single-premium ILPs carry no illustration

The LIA states that under member circular MC 121/13, insurers stopped providing policy illustrations for single-premium and recurring single-premium ILPs from 1 February 2014. The reasoning: the main purpose of an illustration is to show the effect of charges on the policy value; for products with minimal protection, an illustration can easily mislead consumers about the returns they might expect, and this is consistent with the practice of not allowing return projections for unit trusts.

The exception is protection-oriented single-premium or recurring single-premium ILPs. The LIA's definition and conditions are:

1. The death benefit and critical illness benefit (counting only unit-deducting riders) together reach 150% or more of the single premium (for recurring single premium, of cumulative single premiums paid); accidental death and other accident and health benefits are excluded.
2. The test is applied policy by policy, not product by product; cover and premiums for optional riders may be counted.
3. The policy must meet the definition throughout the first 10 years and be assessed on standard underwriting terms at inception.
4. Insurers are permitted but not required to provide an illustration; the rule may not be circumvented by adding riders at inception to reach 150% and cancelling them afterwards.

The LIA also cautions that where a single-premium product allows a death benefit anywhere between 110% and 180%, a customer may first see an illustration for a 160% option but end up buying a 130% option; in that case the adviser must explain that the earlier illustration does not apply.

How to read the three illustration columns

Where an illustration applies (regular-premium ILPs and protection-oriented single-premium ILPs), it shows three investment rates of return: 0%, the higher illustrated rate (currently capped at 8%) and the lower illustrated rate (currently capped at 4%), with the caps subject to the latest LIA circulars. The LIA ILP illustration template updated on 28 July 2026 uses [0%], [B%] and [C%] as placeholders and states that these rates are assumed rates before the funds' annual management charges, purely illustrative, and do not represent upper or lower limits on investment performance. Where the policy value reaches zero in a scenario, it is shown as "-" or "0", with a statement that the policy value may fall to zero, at which point the policy terminates.

A suggested reading order:

1. Start with the 0% column: with no growth, how charges and insurance charges consume the policy value, and roughly in which year it reaches zero.
2. Then the lower column: against total premiums paid, find how many years it takes for the cash value to catch up with premiums paid; remember that fund management charges have not yet been deducted.
3. Treat the higher column as a scenario only: both non-zero columns are illustrative caps, not floors or expected returns, and do not represent future results.
4. Check the table of deductions: this shows the cumulative effect of deductions such as distribution costs and insurance charges.

Statement frequency and other rule differences

Paragraph 35A of MAS Notice 307 defines two kinds of policy as "specified ILPs": regular-premium ILPs, and single-premium or recurring single-premium ILPs whose death and critical illness benefits reach 150% or more of the single premium (or cumulative single premiums). The two groups differ in their statements as follows:

These statement rules are in paragraphs 35 and 35A of Notice 307; a law firm summary indicates that this was one of the decisions in MAS's 13 March 2019 response to its consultation on disclosure reforms (Allen & Gledhill, 28 March 2019, secondary source). For holders of investment-oriented single-premium ILPs, the monthly statement is the most direct way to track unit holdings and charges deducted.

What each type resembles, and whom it suits

In economic substance, an investment-oriented ILP is closer to "a unit trust wrapped in a policy": it carries little protection, and the key questions are sub-fund selection and total charges. It should be compared with buying unit trusts directly or investing through a platform; see Fund platforms and insurer fund ranges. A protection ILP is closer to "life insurance with an investment account": the key questions are whether the sum assured is needed and whether the unit value can support insurance charges in later years. It should be compared with "term insurance plus investing separately"; see Like-for-like comparison.

Neither type suits short-term money, and early charges are usually high (LIA guide). Before choosing, answer three questions: how much life cover you need and for how long; how many years this money can stay invested; and whether you are willing to read statements every year and adjust sub-funds. Different situations are analysed in Who ILPs suit and who they do not. If you would like this interpreted against your own circumstances, you can register your request through the contact details on this site.