Glossary

With profit policy
A conventional With Profit Policy offers a smoother return than many other forms of investment. Under these policies an annual bonus is usually added but is not guaranteed. The smoother investment performance is provided by the guarantee that once the bonuses are declared, they cannot be taken away.

At the end of the policy term assuming the investment manager has been successful, the insurance company will usually declare a terminal bonus but this is not guaranteed. A unitised With Profit Policy annual bonuses are declared by a method similar to interest payments. The units grow at a predetermined rate during the year and if the Actuary is comfortable with the performance of the investments the rate may be increased or maintained. A terminal bonus could be paid as a lump sum at the end of the policy term or as further increases in the rate of bonus on units after a period of time, e.g. five years, this is not guaranteed.