unit-linked policy meaning

A life-assurance policy in which the benefits depend on the performance of a portfolio of shares. Each premium paid by the insured person is split: one part is used to provide life-assurance cover, while the balance (after the deduction of costs, expenses, etc.) is used to buy units in a unit trust. In this way a small investor can benefit from investment in a managed fund without making a large financial commitment. As they are linked to the value of shares, unit-linked policies can go up or down in value. Policyholders can surrender the policy at any time and the surrender value is the selling price of the units purchased by the date of cancellation (less expenses).

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