A Unit linked endowment policy with a money back Clause
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Due to increasingly keen competition in insurance markets, there is a rapid increase in the number of various insurance products in order to cater for the increasing and different financial needs of the clients. Various insurance products, which have more complicated contractual features than the traditional insurance products, like life insurance contracts and life annuities, have been innovated and developed in the insurance markets. One of the main features of this insurance product is that the benefits of the contracts depend on the returns or performance from certain investment funds. The other contractual features of this unit linked contract are a short-term pay-out in case of a financial crisis during the term, and a guaranteed benefit at the end of the term or on death of the policyholder. This benefit was achieved by taking a set of assumptions for example interest rates, risk discount rates, and expenses among others. Profit testing and sensitivity analysis has been used to evaluate the premiums a policy holder pays. As a result, male lives are charged higher premiums compared to the female. In conclusion, the product offers various benefits to the policy holder and a reasonable profit margin to the company. Although, attention should be driven towards interest rates, expenses, discount rate and the allocation rates since they’re sensitive to the product.