Deferred Assurance Example 12

Mr Wills takes out a deferred assurance for his son John, aged 2. The policy is on his own life and matures when John is 18, when a number of options will be available.

The gross annual premium is £140, which will provide a cash sum of £1600 at maturity plus bonuses estimated at £1300. (If Mr Wills dies before this date, then no more premiums are payable, an income of £1200 a year is payable to his wife for John's benefit, and the cash sum and bonuses are still payable when John is 18.)


When John reaches the age of 18, he can take this cash sum, in which case the policy is terminated, or he can continue the policy at the same rate of premium of £140 p.a. This would provide a sum assured of £15,000 on a with-profit whole-life policy or one of £13,000 on a with-profit endowment maturing at age 55 (other terms could also be chosen). The normal rates of premium for those terms and sums assured would be £180 and £175 respectively.

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Other Children's Policies

There is another category of policies especially designed for children. These are deferred assurances and are known by names such as "junior policies" or "child's assurance".

The parent takes out an endowment policy on his or her own life to mature when the child is 18 or some other specified age. At this age the parent then has the option of taking the cash sum provided by the policy (on the child's behalf), or the child may continue to pay premiums at the same or a higher rate for a with-profit endowment or whole-life policy, regardless of the state of his or her health.

If... see: Other Children's Policies

Of interest