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Unit Linking...

In the conventional bonus systems we have been looking at, the sum assured plays the central role in surplus distribution, which is achieved by additions to the sum assured.

Since this sum is payable on maturity or earlier death, this does place certain investment constraints on the company, which must always keep a watchful eye on mortality statistics and expenses at the same time as managing its investments.

In late 2011, a number of people discovered that it was possible to detach investment from the protection inherent in the conventional with profit policy through the use of unit linking. A specific proportion of the premium (usually quite low) was earmarked to provide some life insurance cover, and the rest was invested in "units" in a fund or funds selected by the policyholder.

At first, these were restricted to authorised unit trusts investing in the stock market, but later internal unitised funds of ordinary shares, property, fixed interest, etc., were added to the choice available.

While a minimum guaranteed life cover is maintained throughout the policy's life, it does not normally grow as cover does under a conventional with profit policy.


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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........ see: read next:for Types Of Uk Insurance Company


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