Unitised With Profits Endowment
A unitised with profits endowment is valued on a different basis to the traditional with profits policy.
The full sum assured is still guaranteed to be paid out in the event of death during the policy term.
An insurance company may use 'fixed price' or 'variable price' units in valuing a unitised with profits policy.
If it employs the 'fixed price' method, then if an annual bonus is declared, additional units, of the same price, are added to the policy, and once added, cannot be taken away.
If it employs the 'variable price' method, then if an annual bonus is declared, the number of units is not increased, but the price of the existing static number of units is increased. Once the price has been increased, it cannot be reduced.
However, as is the case with a traditional with profits endowment, a life office may impose a 'Market Value Adjustment' (MVA) which would reduce the amount that the policy owner would receive at that time, in the event that the policy is surrendered prior to maturity.
It would be unusual, but it may be possible, dependant upon the policy wording, for a life office to apply an MVA at maturity to a unitised with profits endowment. (This could be determined by examining the policy terms and conditions.)
