With Profit Policy Types
- Traditional with Profits policy
These policies are the back-bone of the traded endowment policy market. The popularity
of these policies is that the amount payable on maturity (or death) is the guaranteed
sum assured, plus any accrued bonuses. Due to the variable nature of future bonuses,
it is not possible to guarantee what the eventual pay outs might be, so projections
are based on past experiences. Premiums are higher than for non-profit policies
with a similar sum assured.
- Low-cost with Profit Policy
This is a low cost version of the with-profit endowment. These policy types utilise
a combination of with-profit endowment and decreasing life assurance. They were
introduced as a cheaper way of covering house purchase loans, with the guaranteed
death sum assured being equal to the loan. As the basic sum assured is less than
it would be under a full with-profit policy, the premiums are cheaper and due to
the life assurance element, there is a guarantee that the loan will be repaid on
- Low-start with Profit Policy
The low-start policy is a variation of the low-cost policy. Premiums start at a
low level and rise gradually over a number of years to the full premium. The initial
premium is very low, but this is balanced by a full premium that is somewhat higher
than an ordinary low-cost policy. This type of policy is aimed at the house buyer
who is working on a very tight budget and expects salary increases in the future.
The sum assured and bonuses continue through the term of the policy in the normal
low-cost basis and are not affected by the low initial premiums.
- Unit Linked Policy
These policies were designed specifically for use with mortgage repayment. The premiums
are used to buy units in a managed fund at the prevailing market price. The number
of units held increases over time as more and more premiums are paid. There is no
guaranteed annual growth rate caused by the addition of annual reversionary bonuses.
Instead, the value of the endowment depends on the underlying investment performance.
Not all the premium goes towards investing in units. Some of the units are cashed
in to buy life cover. As with other endowments, the life assurance element ensures
that the full loan can be paid back if the policyholder dies.
- Unitised with Profit Policy
Unitised insurance funds or unit-linked insurance funds are a form of collective
investment offered through life assurance policies.
- With Profits Flexidowments
The Flexidowment is an policy that has an open-ended term after an initial period.
These policies can be cashed in without the normal surrender penalty, at any time
after 10 years. The surrender value is usually guaranteed, or partly guaranteed,
and is similar to an early maturity value than the traditional policy surrender