Unit Linked 'Whole of Life' Policies

There has been some coverage in the press recently regarding the workings of these type of policies, with particular attention being given as to when they are reviewed and the increases in premiums that are required to maintain the same level of cover.

I ran off some quotes for a Male & Female aged 30 next birthday, both non-smokers, €250,000 life cover on a 'Dual Life' basis over 35 years.

A Convertible Term policy would cost about €45 per month. The premium and sum insured are guaranteed for 35 years with an option to convert to another policy without medical evidence.

A Whole of Life policy will generate a 'recommended' premium of about €90 per month for the same cover. This is the premium that the quotation disc generates so that the policy would be sustainable for 35 years, assuming a growth rate of 6% on the value of units purchased. This plan will also be reviewed after 10 years and every five years thereafter to age 65. After this, it can be reviewed annually.

You don't have to have an actuarial qualification to figure out that this does not make sense. It may be time to overhaul this type of product or get rid of them altogether.

If you invested the difference in cost, €45, over the next 35 years and achieved a return of 5% net, you would generated a cash fund for yourself in the region of €50,000