A variable universal life (VUL) policy combining protection and investment with super-low rates at 2%.
A variable universal life (VUL) policy combining protection and investment with super-low rates at 2%.
In the past, when taking out an investment-oriented variable universal life (VUL) policy, the actual amount of funds available to be invested during the first 5 years of the policy has been very limited - something necessarily due to the fact that most of the premium is spent on the cost of the life insurance cover.
Having purchased this type of policy with the intention of acting early to secure both insurance protection and sound investments, many consumers have subsequently discovered that, during the first few years of the policy, the amount of accumulated funds available for investment has fallen far short of their expectations.
First-Aviva have recently launched their “Enrich Your Life” insurance program, which comprises a VUL policy with rates ranging from 1.8-2%. Unlike the general trend of demanding high charges from policyholders, the “Enrich Your Life” program offers the consumer the dual advantages of insurance protection and investment opportunities from the very first year, meaning that they no longer need worry about the cost of the insurance protection eating away at their investment funds.
First-Aviva general manager Lin Yuan-hui explains that most investment-linked insurance policies can be classified according to the two main categories of VUL insurance (which includes life insurance cover) and variable annuity insurance (which serves purely as an annuity platform). As the former category includes life insurance cover, a portion of the premiums paid by the policyholder is deducted to pay for the cost of the life insurance.
This means that the total premium rate during the first five years of the policy can reach 130-150%, with only the funds remaining after this deduction made available for investment. Nonetheless, it also means that the policyholder is able to enjoy a fuller level of insurance cover. As a result, this type of policy is more suited to people who are looking to invest but who also have a relatively low level of existing insurance cover, or for young people at the beginning of their working lives.
Premium rates for variable annuity products are relatively low (on average only about 1-3%) due to the fact that annuities do not include life insurance cover, meaning that policyholders are free to directly invest the majority of their funds.
However, a disadvantage of this type of policy is that, should the policyholder die during the insured period, only the value of the policy account at the time of death can be redeemed. In this sense, as the variable annuity lacks the function of providing insurance protection, it is more suited to people wishing to use investment-linked policies purely for investment purposes or retirement planning.
In order to satisfy consumers looking to make sound investments as well as possessing adequate life insurance cover, First-Aviva’s “Enrich Your Life” program combines the advantages of both types of investment-linked products detailed above by increasing the policyholder’s life insurance cover while offering the same rates as for an annuity-style product. Premium rates are only 2% for the first three years, then dropping to 1.8% in the fourth year of the policy. This makes it suitable for young people with lower levels of insurance cover and smaller budgets, as well as for other consumers looking for both protection and investment.
Paying a monthly fixed sum of just NT$2000-3000 enables the consumer to enjoy the benefits of both life insurance protection and investment opportunities, with a much higher amount of funds available for investment than with ordinary VUL products or even some kinds of variable annuities.
Also, with the choice of more than 100 investment targets, a total of six free investment target transfers can be made during each policy year. This makes the “Enrich Your Life” program the number one choice for people wanting to start managing their money early and accumulate funds for retirement. In addition to this, the “Enrich Your Life” program also offers riders for cancer insurance and critical illness and injury insurance - something that most variable annuities are unable to provide.
First-Aviva general manager Lin Yuan-hui reminds the public to be clear of their individual needs when purchasing investment-linked insurance policies. He advises consumers to consider whether they require life insurance protection before deciding whether to take out a life insurance-based or annuity-style insurance policy.
Second, he emphasises the importance of understanding the structure of the various related charges, which in the case of investment-linked policies will usually include premium rates, account management fees, administration charges, termination fees, and so on. Consumers should ask their financial advisor or salesperson to list and explain the various charges to ensure that they fully understand how the policy operates.
Lin Yuan-hui also recommends that, although some investment-oriented policies accept flexible payments, fixed payments are the more desirable choice. This is because making fixed payments forces the policyholder to save and thereby eliminates the risk of being too relaxed about making payments; accounts with inadequate values run the risk of jeopardising the level of insurance cover provided.
Comparison of First-Aviva “Enrich Your Life” with other investment-linked policies
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| Variable Universal Life (VUL) Insurance | Variable Annuities | First-Aviva “Enrich Your Life” Program |
| Additional charges | Approximately 130-150% for the first five years | Approximately 1-3% | 2% from years one-three 1.8% from year four |
| Life insurance cover | Yes | No | Yes |
| Medical and accident riders | Yes | No | Yes |
| Taxation | Tax exempt | Income from investment account is taxed as inheritance | Tax exempt |
| Function | Both protection and investment | Retirement planning | Both protection and investment |
| Ease of taking out the policy | Relatively complex: requires a medical examination, with premiums varying based on age and health | Relatively easy: no medical examination needed and no age restrictions | Relatively complex: requires a medical examination, with premiums varying based on age and health |
| Target consumer groups | People who have already taken out traditional life insurance, but are looking for further protection and investment opportunities | People who already have adequate insurance cover and are more concerned with the retirement planning aspect of investment | Younger people with lower insurance cover and those at the beginning of their working lives |
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About First-Aviva
First-Aviva is an insurance company created as a joint venture between First Financial Holding and the Aviva Group.
First Financial Holding made an initial capital contribution of NT$2.25 billion and holds 51% of shares in the company, while the Aviva Group holds 49%.
First-Aviva has signed an exclusive bank insurance contract with First Bank, First Financial Holding’s flagship subsidiary. This enables First-Aviva to provide life assurance, retirement plans, and other insurance products through First Bank’s 190 branches across Taiwan, thereby bringing innovative products and services to the bank’s clients.
About the Aviva Group
- Aviva is the world’s fifth-largest insurance group (based on gross worldwide premiums at 31 December 2008), the largest insurance services provider in the UK, and one of the leading providers of life and pension products in Europe. It serves around 53 million customers in Europe, North America and the Asia Pacific region.
- Aviva’s main business activities are long-term savings (including life assurance, savings plans and retirement plans), fund management and general insurance, with worldwide total sales of £45.1 billion and funds under management of £379 billion (as at 31 December 2009).
- The Aviva media centre at www.aviva.com/media includes images, company and product information and a news release archive.
- In Asia, Aviva markets its products and services through various sales channels (including direct sales teams, brokers and bank insurance) and has operations throughout Singapore, Hong Kong, mainland China, India, Sri Lanka, Malaysia, Taiwan, South Korea, Australasia and the Middle East.
About First Financial Holding and First Bank
- On 2 January 2003, First Financial Holding Company was incorporated through a share swap with First Commercial Bank as the flagship entity.
- As of the end of 2008, First Financial Holding (Taiwan Stock Exchange code: 2982) had total assets of NT$1.6 trillion, making it Taiwan’s seventh-largest financial group. The company provides comprehensive financial services to more than 5 million individuals and businesses.
- First Commercial Bank was established in 1899 and is the group’s main source of profit.
- First Commercial Bank leads in market areas such as deposits and lending, SME loans, home mortgages and fund sales, serving its clients from 190 outlets (including branches and representative offices) across Taiwan.
Media Contacts
First-Aviva - Johnson Lu
Telephone: (02) 8758-1169
E-mail: johnson_lu@first-aviva.com.tw
First-Aviva - Anna Chang
Telephone: (02) 8758-1067
E-mail: anna_chang@first-aviva.com.tw