Investment-linked policies

Life is a journey and we learn many lessons while traveling down this road. I will title today's lesson as "never buy Investment-Linked policies (ILPs)".

I contacted my insurance agent regarding one of my ILPs that I contribute monthly. It had appreciated by 4%. I gave a few scenarios, wanting to know the consequence of my action and here is what I was told:

1) Terminate it now and I will lose 40% of my initial investment. Why? That's the penalty for early termination of the policy.
2) Keep the policy and in 4 years' time (I call this the break even point), there won't be any penalty when I terminate the policy.
3) Change the monthly contribution amount, and/or the contribution interval i.e. three monthly or half-yearly, and prolong the 4 years to another 6 or 10 years.

If I had invested in stocks, ETFs or mutual funds via a brokerage firm, I would only have to consider:

a) whether I make a profit or loss. In this case, I have made a profit.
b) the commission I would have to pay the broker, which definitely would not cost me 40% of my initial investment.

If I had invested via a brokerage firm, I would have the freedom to sell whenever I want and not be tied down by terms and conditions that insurance companies use.

Therefore, if you want protection, buy a purely protection policy i.e. term. If you want to invest, invest in stocks, bonds, mutual funds and ETFs via a brokerage firm. Never again will I buy an ILP.

PS: I mentioned 'term' and not 'life' insurance for protection because there are many issues discussed about life/living policies on the net. It is not a topic I want to delve into in this post.

Here is one link regarding the 'not-so-good' side of life insurance:
http://www.daveramsey.com/article/the-truth-about-life-insurance/

There's plenty of info on the net. Take your time to research and have fun!