Hot New Product Launched

Seems I am pretty backward when it comes to insurance products.

I was recently introduced to a new ILP plan from Company X. Some hype about it includes:
- 100% premium allocation (Most ILPs suffer allocation charge for first 3 years)
- No Bid-Offer spread (Normally a 5% spread which is like a sales charge)
- Wide range of fund available (Usually restricted to within company funds only)
- Bonus units of 10% on 1st year and more every 5 years
- Unlimited free fund switch
- Guaranteed issuance
- Death benefit of 105%
- Available to private high networth clients only

Does it sound too good to be true?

A quick Google found similar products already available since 2008, from Company Z and Company F.

How can the company pay for agent commission, give 100% allocation, no bid-offer spread, short tenure of 10 years and even give bonus units! So, what is the catch?

As expected, the devil is in the details. The usual terms are stated clearly upfront, things that regulators require to be declared are made to sound positive. However, charges are layered in such a mind bending way that the unprepared public can never comprehend fully. For starters, premiums are allocated to two different accounts, some charges levied on one of them, some more charges levied on the other and additional charges on both! Talk about triple tier cost, simply put, it is like having the food's delicious photo and exact price on the menu but later slapping GST, service charge and VAT charge. Further, although withdrawals are allowed, early surrender charges are practically 100% of premiums throughout the policy term.

Whoever came up with this product is amazingly creative. It managed to beat the system and in fact took advantage of the system to highlight the required aspects to their benefit. The charges are exceptionally higher, yet the plan sounds more attractive.

Brings application to - if you cannot convince, confuse.