Variable unit linked is a type of life insurance policy where the value of the policy varies depending on the performance of underlying investments. It works similarly to a regular investments, but is tailored to the needs of life insurance policy holders who want the potential to increase their policy’s value while still having the security of a life insurance policy. This type of policy combines the advantages of both investing and insurance and allows policy holders to grow their policy’s value while enjoying the same protections and guarantees of a life insurance policy.
The underlying investments in a variable unit linked policy are typically stocks, bonds, mutual funds, and exchange-traded funds (ETFs). These investments are chosen based on the policyholder’s goals, risk tolerance, and time horizon for the policy. The policyholder can select from a variety of pre-set portfolios or can design and manage their own portfolio. The premium payments made by the policyholder are used to purchase units in the selected funds, with the number of units purchased determined by the performance of the investments and the premium amount. The value of the policy will rise and fall in synch with the performance of the underlying investments.
A variable unit linked policy provides policyholders with the ability to tailor their policy to meet their financial goals, to benefit from the potential growth of the stock market while still safeguarding them against losses. The policy may also offer additional benefits, such as no-claim bonuses, prepayment bonuses and death benefits. However, it is important to remember that the investments within a variable unit linked policy are subject to fluctuating values and may experience losses in the event of a market downturn. Therefore, it is important to understand the risk associated with these policies and to consider the policyholder’s long-term financial goals when choosing this type of policy.