A Guide To Life Insurance - Unit Linking Uk ....


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Unit Linking Uk...

But the value of the investments, mirrored in the price of the units, will always provide a sum reflecting exactly the investment experience of the chosen fund.

The policyholder in this situation does not need the calculations of the actuary to decide how the surplus is to be distributed because it happens automatically. At maturity, he simply receives the net value of all the units that his premiums have purchased over the years or the units themselves.

Since this sum will relate very closely to the level of market values, whatever type of fund is involved, the policyholder is exposing himself to certain investment risks.

Whereas the conventional system takes on the investment risk and spreads it over large numbers of policyholders and also over time, the unit-linked policy requires the policyholder to shoulder the investment risk himself, without the safeguards of the conventional company's "smoothing operations".

A full comparison of conventional and unit-linked insurance will be made elsewhere.

But it is here worth emphasising again the difference in cost between pure protective life insurance and investment-oriented policies, whether conventional or unit linked.

A 30-year-old man may have to pay about £2117 a year to guarantee the payment of £200,000 to his family if he dies within the next 15 years; to provide also the return of that sum at the end of 15 years with a non-profit endowment policy may cost him as much as £2500 a year; and to participate in profits would raise the annual cost to about £2700.

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Just as there are several varieties of life insurance there are likewise several types of life insurance company. Just search Google and you will see the sheer number of underwriters, brokers and price comparison sites listed.
Conventional with profit and non-profit policies are the speciality of the "ordinary branch" life insurance companies, which may be Mutuals (owned by their own policyholders), or proprietary companies (owned by shareholders like any other industrial company).
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