Low-Cost Cover

Low-Cost whole-of-life insurance offers a guaranteed pay-out in the event of your death, whenever that may be. You will be required to pay monthly premiums, usually of a fixed value. Some of the money from these premiums will be invested by the insurance provider whilst the rest will be put aside to cover the sum paid to your survivors. The policy itself offers one of two sums assured, that is, two versions of the sum of money paid to your survivors when you die. The final pay-out will be the larger of a) the basic sum assured plus any investment bonuses or b) the guaranteed sum assured.

The bonuses that your invested money earns are added to the basic sum assured, which should thus increase year on year. It is effectively a with-profit policy with a guaranteed sum assured should the investment perform badly. The monthly premiums that you are required to pay will often be lower than for a with-profit insurance, but the value of the bonuses you receive will reflect this: your returns will not be as high as they would have been from a with-profits policy. The name low-cost refers to the lower cost premiums that you pay in return for smaller investment profits.