Term assurance policies have no investment element in the premiums from the point of view of the policyholder. The policies are for the purpose of protection only, and because this protection is for a limited period, a payout by the life office is not inevitable.

However, life assurance can be used as an effective investment medium. In the case of whole life policies, a payout will occur on the death of the life assured – whenever this takes place. On the other hand, an endowment policy will mature and pay out a sum of money after a fixed period – usually ten years or more.

Both whole life and endowment policies can be for a guaranteed fixed return only (non profit), or linked to an office’s investment performance. In the latter case, there are two ways in which this can be done:

• With profit policies, where benefits are indirectly affected by performance, or
• Unit linked policies, where the link with the investment performance is direct.