How is your money invested?

There are different ways in which insurance companies invest your premiums. Some of the most popular are with-profits funds, unit-linked policies and bonds.
With-profits: The premium you pay is combined with those of other customers and invested in stocks and shares, government bonds, real estate and currencies. This variety reduces the risk of your investment and smothers the return on your money. The investment growth is paid regularly and added to your policy. Although growth and bonuses are not guaranteed, it is likely for you to get a good return over the years.
Unit-linked policies: These policies are only guaranteed if you die. You choose the funds you want to invest in and the amount payable depends on the value of those funds at the time the policy matures. The risks depend on the funds you choose, which provides no guarantee of the value paid at maturity. Unit-linked policies have higher potential benefits and risks than with-profits funds.
Bonds: You can choose to pay only an initial large premium which your insurance company can invest in its with-profits fund or as a unit-linked investment. With the latter your premium is usually invested between one or two funds. The return depends on the movement in the unit prices throughout the life of the policy. A guaranteed income bond pays a regular income at a stated rate until the maturity date.
Including most in your policy for the least amount
Although permanent life insurance is very expensive, there are ways in which you can have more benefits for a lower price.
·        Compare different companies to find out the rates and benefits that adjust best to your needs.
·        Buy only the necessary amount.
·        Have a healthy life style; don’t smoke, don’t drink too much, exercise…
·        Take the life insurance offered by your employer and complement it if necessary.