They have been around for nearly half-a-century and are still a popular way of providing whole-of-life assurance.
In fact, the returns can be greater than returns from, for example, a with-profits policy.
However, with greater potential return comes greater risk - simply because of the tighter link with the stock market which this type of policy exploits.
It was out of this desire by policyholders, to be more directly involved in the stock market, that this type of policy was created in the first place.
Basically, premiums are used to purchase units of a chosen fund. As time passes, more and more units are purchased.
The cost of providing life cover is met by 'cashing in' sufficient units each month from the total built up.
When the policy matures, the policyholder receives an amount equal to the total value of units allocated to the policy at that particular time, whatever that happens to be.
However, there is no minimum amount guaranteed at maturity. That's the risk, although most unit-linked policies do provide a fixed amount if the policyholder dies before the end of the term.
