Reviewed by Aug 27, 2020| Updated on
Insurance bonds are also called as investment bonds. These are investment-linked instruments primarily in operation in Australia and the UK.
What is Insurance Bonds?
Insurance bonds are offered by life insurance companies in the form of term life or whole life insurance policies. They are straightforward investment options that let investors accumulate money over the long-term. Investors can choose any fund, which is being offered by their respective insurers. In addition, they come with some tax benefits.
The investment for such bonds can be made in the form of a lump sum or instalments. The bonds come from pooled premium funds. The insurer invests the funds collected in equities and other securities that can create high returns on investment.
Insurance bonds can be thought of as a way of distributing surplus funds by a company. Creating such bonds were commonly seen in fraternal life companies. After unitised insurance funds were rolled out, insurance bonds are called unit-linked bonds.
Highlights of Insurance Bond
Insurance bondholders receive regular dividends.
Insurance bonds are an excellent option for those looking to accumulate a significant sum over a long time.
Investors of insurance bonds receive a part of the investment if they cash-in early.
Bonds payout on the death of the insured person. The insured person, in this case, may or may not be the same as the person who purchased the bond.