%%PARTNER_SITE_TITLE%% _ 1 Stop Independent Advice On Life Insurance And Sickness Cover _ Unit Linking Explained
Published / Last Updated on 26/10/2006
Unit Linking Explained It is possible to take out savings plans or invest lump sums into funds operated by life assurance companies. The premiums or lump sums that you pay buy units in the fund of your choice and are given a value. This value can fluctuate on a daily basis, depending on how much the underlying assets of the fund are worth. Every time you pay a premium or invest a lump sum you buy more units. The value of your policy at any given time is the number of units you hold, multiplied by the current price of those units.
Pound Cost Averaging Pound Cost Averaging happens when a person pays regular premiums into a unit linked fund. Because the value of the units continually fluctuates, you could be paying premiums when the price of new units are expensive or cheap. If the price of units falls, you will be able to buy more units for your money. This means that when the price of the units rise, your policy will be worth more because you own more units. Conversely, if the price of units rise, you will buy less units for your money.
Types Of Fund Available Investing in unit linked funds usually gives you a wide choice of where you would like your money invested. For example, many life assurance companies offer funds ranging from cash based to international, property, ethical, specific country and managed funds. Managed funds tend to have a mix of investment sectors within them which tends to spread out the risk of large fluctuations by diversifying where money is invested. If you want to change your fund choice, most companies allow you a free switch each year. This means that if you want to move from one fund to another for whatever reason, you can.