Unit-Linked Endowment
A unit-linked endowment provides no guaranteed maturity pay out, and the proceeds upon maturity are reliant upon the value of the underlying investment fund on the maturity date.
The full sum assured is still guaranteed to be paid out in the event of death during the policy term.
A unit-linked endowment provider would usually offer a range of funds, from which the policy owner can choose. The value of the policy is directly linked to the underlying value of the funds in which it is invested, and it may therefore be more volatile than a with profits endowment.
There would also normally be an option to switch funds during the course of the plan, although there may be a small switching cost charged by the insurance company.
Nevertheless, the ability to switch funds is a valuable facility, as it may be beneficial to switch out of 'stock market' based funds in the last 3 to 5 years prior to maturity, to preserve gains made up to that point, and guard against the possibility of the investment reducing in value, should stock markets fall, with little or no time left before the policy matures to recover any value lost.
