Life Insurance Guide | Insurance Help Product Information

TheMoveChannel.com | Single Premium

These contracts (often called bonds) are the simplest form of a unit-linked policy. They are normally written as whole life contracts, so that the investor can continue the contract as long as he likes. When the policy is effected, the whole of the single premium is applied to purchase units in the selected fund or funds at the offer price ruling on the day of payment. The policy can then be wholly or partly cashed in at any time – the surrender value being the total value of the units at the bid prices on the day of surrender.

If the life assured dies, the death claim value will be paid out. This is usually 101% of the value of the units, to reduce costs and make it easier for older lives to invest by avoiding underwriting, though this varies between offices. Some offices offer more substantial levels of life cover, for example, 120% at age 50 or 200% at age 30.

Many contracts allow the investor to pay in further single premiums at any time. This ‘topping up’ facility is useful, since it eliminates the necessity of taking out a completely new policy. Most offices offer both single life and joint life second death versions of this contract.

Some offices offer increased allocations to larger investments – eg. 101% for investments over £30,000. There is also a trend towards imposing surrender penalties for early encashment – eg. A 3% penalty for first-year surrenders, 2% for second-year surrenders and 1% for surrenders in the third year.