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Accumulating WP

U

User 1234

Member
In chapter 6, under section 3.5,
It says that " When a policy pays premiums into a conventional with-profits contract there is no immediately obvious relationship between the stated benefit (a distant sum assured plus attaching bonuses) and any present value of the policy."

I don't understand this sentence, what is the present value of the policy referring here? Is it present value of future profits or asset share or the present value of the liabilities?

Thanks a lot in advance!!
 
BPPActed said:
In chapter 6, under section 3.5,
It says that " When a policy pays premiums into a conventional with-profits contract there is no immediately obvious relationship between the stated benefit (a distant sum assured plus attaching bonuses) and any present value of the policy."

I don't understand this sentence, what is the present value of the policy referring here? Is it present value of future profits or asset share or the present value of the liabilities?

Thanks a lot in advance!!
Click to expand...

Hi

I suspect the heading threw people off as your question is actually about CWP contracts and NOT AWP.

CWP:

The point is that a p/h wouldn't 'see' a direct relationship with each premium paid and the resulting change in benefits as it's based on the insurer's basis.

This is in contrast to UWP policies where each premium broadly results in an increase to the unit fund by the same amount (of course after adjustment for charges - b/o spread, fees etc). UWP is more transparent than CWP.

Hope that helps.
 
Thank you Mugono,
Now it seems much clearer.

mugono said:
Hi

I suspect the heading threw people off as your question is actually about CWP contracts and NOT AWP.

CWP:

The point is that a p/h wouldn't 'see' a direct relationship with each premium paid and the resulting change in benefits as it's based on the insurer's basis.

This is in contrast to UWP policies where each premium broadly results in an increase to the unit fund by the same amount (of course after adjustment for charges - b/o spread, fees etc). UWP is more transparent than CWP.

Hope that helps.
Click to expand...
 
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