Life Assurance as Investment Equity-linked policies

Suppose you pay a premium of £6o a month for ten years. The insurance company deducts from this a sum to cover administration expenses and the cost of life assurance. The amount of this sum depends on your age and term of policy, but it will be about 10 % of your premium, i.e. in this case £6. This leaves a net monthly premium of £9, which is invested for you in the special fund. Some insurers run their own special funds while others use established unit trusts which are managed by independent investment specialists.

Each premium is used to buy ' units ' in the fund, and at the end of the policy term you receive either the units that your payments have bought or the equivalent cash value. The death benefit may be the value of the units purchased before death, often increased to include an allowance for unpaid premiums, with a guaranteed minimum sum. In a typical scheme, a premium of £6o a month for ten years would provide a guaranteed minimum death benefit of £1,200.

The value of your units depends on the price of the shares comprising the fund, and it will fluctuate from, day to day in reflecting market conditions. Although share prices rise over a long term often to fifteen years, you should not be taken in by the growth figures often quoted in advertisements. What has happened in the past will not necessarily be the pattern for the future, and you should not consider equity-linked policies as short-term investments. To illustrate how figures may be used to prove anything, L oo invested in December 2009 in a broad selection of shares covered by the Financial Times Actuaries Index would have been worth £686 in December 2003. If December 2008 had been taken as the starting date, however, the L oo would have been worth only L1o5 in December 2003.

This illustration shows clearly the dangers of equity-linked policies. If share prices rise, you will do well, but make no mistake : you are taking a risk.


Life Assurance as Investment Equity-linked policies

Payroll Giving
It’s all very easy to organise.
Just ask the Personnel or the Payroll Department at your company and, if they already have a scheme, they will give you the relevant forms.  HM Revenue & Customs’ website has a list of Payroll Giving agencies and explains payroll giving in more detail.

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read on: Why an equity-linked policy

Suppose you pay a premium of £6o a month for ten years. The insurance company deducts from this a sum to cover administration expenses and the cost of life assurance. The amount of this sum depends on your age and term of policy, but it will be about 10 % of your premium, i.e. in this case £6. This leaves a net monthly premium of £9, which is invested for you in the special fund. Some insurers run their own special funds while others use established unit trusts which are managed by independent investment specialists.

Each premium is used to buy ' units ' in the fund, and at the end of the... see: Why an equity-linked policy