Investment-linked policies have been in Malaysia for more than a decade. While it takes the form of a life insurance policy providing protection upon death or disablement, it also has an investment component. Ordinary life insurance policy funds are invested in various investments including properties, plant & equipment, government papers, private debt securities, foreign assets, loans, as well as stocks and shares. Investment-linked funds, on the other hand, are invested basically in stocks and shares as well as fixed income funds.

Ordinary life insurance policies normally have minimum guaranteed cash values which is absent in investment-linked policies. The cash values or total investment values is dependent upon the performance of the investment-linked funds. Thus, these values are not guaranteed. These funds may be priced singly or with a bid and offer spread. 

Investment-linked policies are more flexible allowing the policyholders to take premium holidays. As long as there are cash values, the policies will continue to provide cover. In addition, policyholders may perform partial withdrawals by selling off units when the need arises. Such withdrawals do not attract interest unlike ordinary life policies.

Because of the transparent features, insurance charges are clearly illustrated on a year to year basis according to age increase. As such, protection or coverage may be varied over the lifetime of the policies subject to underwriting. 

Most investment-linked policies will allow the addition of riders to provide a more comprehensive protection, for example, critical illness, medical, and accident riders. The choice of funds may also be varied over time depending on the economic environment.