Unitised with-profits policy
Premiums paid by the policyholder are used to purchase units in a ‘with-profits’ fund at the current unit price. The insurer guarantees that each unit added to the fund will have a minimum value which is the bid price of the unit. This is the guaranteed amount. In addition, the insurer may add two types of bonus to the with-profits units. These are a regular bonus, which may be added daily as a permanent increase to the guaranteed amount, and a final bonus that may be added on top of those guaranteed amounts when the with-profits units are cashed in. Levels of regular and final bonuses are adjusted twice per year. Both regular and final bonuses are discretionary amounts and are generally set based on expected future returns generated by the funds.