Flexible Whole Of Life Policies
June 10, 2019
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A whole-of-life assurance policy can be issued in a number of different ways. One of these types is a 'flexible whole-of-life assurance policy' - also referred to by some as the unit-linked whole-of-life assurance.
Essentially, the flexibility of this type of policy lies within the fact that they will usually offer a variable mix between life cover and investment content. The crucial part of this flexibility is the way in which the life cover is paid for by cashing in the units at the bid price (the price at which the fund manager will buy back the units). The process can be summarised as follows:
- The policy holder chooses the amount of premium that he wishes to pay or indeed that he feels that he can afford to pay.
- The premiums are then used to buy units within the policyholders chosen fund(s) and these are then allocated to the policy
- Where a high level of life cover is required, the policy holder will ensure that a larger number of units are cashed each month and subsequently a lower number of units will remain attaching to the policy. The resulting factor will mean that the investment element of the policy is also lower. Naturally, a lower level of life cover present means fewer units cashed and hence a higher level of investment.
- Due to the flexibility of the system, the policyholder will have a number of other options available to choose from such as an option to take income, indexation of benefits, (To protect against inflation) and the ability to add another life assured (Such as a spouse or partner)
Despite the fact that this type of policy can contain a high level of investment; a Flexible or Unit-linked whole-of-life assurance policy should still be regarded as a protection policy rather than primarily a savings vehicle.
Many companies providing flexible whole-of-life policies will offer three main levels of life cover. These are maximum cover, minimum cover and balanced cover. Many will also allow a certain amount of tailoring in between. In order to qualify for preferential tax treatment, in all cases the initial life cover is guaranteed for a certain period which will usually be ten years. Beyond the guaranteed cover period, the life company will often review the policy and in particular the premiums in order to take account of growth rates and increase in costs where applicable.
Article Source: http://EzineArticles.com/6646608
Essentially, the flexibility of this type of policy lies within the fact that they will usually offer a variable mix between life cover and investment content. The crucial part of this flexibility is the way in which the life cover is paid for by cashing in the units at the bid price (the price at which the fund manager will buy back the units). The process can be summarised as follows:
- The policy holder chooses the amount of premium that he wishes to pay or indeed that he feels that he can afford to pay.
- The premiums are then used to buy units within the policyholders chosen fund(s) and these are then allocated to the policy
- Where a high level of life cover is required, the policy holder will ensure that a larger number of units are cashed each month and subsequently a lower number of units will remain attaching to the policy. The resulting factor will mean that the investment element of the policy is also lower. Naturally, a lower level of life cover present means fewer units cashed and hence a higher level of investment.
- Due to the flexibility of the system, the policyholder will have a number of other options available to choose from such as an option to take income, indexation of benefits, (To protect against inflation) and the ability to add another life assured (Such as a spouse or partner)
Despite the fact that this type of policy can contain a high level of investment; a Flexible or Unit-linked whole-of-life assurance policy should still be regarded as a protection policy rather than primarily a savings vehicle.
Many companies providing flexible whole-of-life policies will offer three main levels of life cover. These are maximum cover, minimum cover and balanced cover. Many will also allow a certain amount of tailoring in between. In order to qualify for preferential tax treatment, in all cases the initial life cover is guaranteed for a certain period which will usually be ten years. Beyond the guaranteed cover period, the life company will often review the policy and in particular the premiums in order to take account of growth rates and increase in costs where applicable.
Article Source: http://EzineArticles.com/6646608