Investment-linked life insurance policies were considered as an attractive form of investment. Unfortunately, many people found out that this was far from the truth, and today they are fighting for their money. How to get them back? We answer below.
Table of Contents
- What Is an Investment-Linked Life Insurance Policy?
- Why Were Investment-Linked Life Insurance Policies Disadvantageous?
- Payments for Early Termination of an Investment-Linked Life Insurance Policy
- Can an Investment-Linked Life Insurance Policy Be Invalidated?
- How to Recover Money From an Investment-Linked Life Insurance Policy?
- Investment-Linked Life Insurance Policy – Common Mistakes
- Investment-Linked Life Insurance Policies – Summary
- FAQ – Investment-Linked Life Insurance Policies
What Is an Investment-Linked Life Insurance Policy?
A Unit-Linked Insurance Policy is a type of contract that combines life insurance with investment in an insurance capital fund. Although formally it was an insurance product, in practice its investment nature dominated. Most part of the contribution was directed to the capital market and invested in various assets via funds, e.g. stocks or bonds.
Insurance companies charged high fees, including administrative and management fees. They often amounted to several percent of the total account value per year. As a result, clients’ profits were minimal. Many suffered significant losses, losing a large part of their invested funds.
Why Were Investment-Linked Life Insurance Policies Disadvantageous?
The problems with investment-linked life insurance policies stemmed mainly from their non-transparent structure and aggressive marketing.
Customers were often:
- poorly informed about risks,
- misled about profit guarantees,
- unaware of the high fees for early termination of the contract.
These issues resulted in numerous lawsuits filed against insurers and financial intermediaries.
Payments for Early Termination of an Investment-Linked Life Insurance Policy
Liquidation fees reached up to 100% of the account value. They were commonly used by insurers as a deterrent to early termination. In practice, this placed clients in a very difficult position. They had to choose between staying in an unfavourable contract and facing high costs or ending it early and losing most of their invested money.
Can an Investment-Linked Life Insurance Policy Be Invalidated?
In some cases, insurers invested contributions in risky Closed-End Investment Funds. This made it impossible to withdraw funds, even in the event of the policyholder’s death. Courts consider such actions a violation of the essence of the insurance contract and declare it invalid. Additionally, offering Closed-End Investment Funds to people without sufficient capital is seen as circumventing the law. This is another argument in favour of declaring such contracts invalid.
Invalidating an investment-linked life insurance policy allows for the full recovery of paid contributions. The contract is treated as if it never existed, meaning the insurer has no right to keep any funds. If a court declares a contract invalid, the insurer must return all contributions made by the client.
How to Recover Money From an Investment-Linked Life Insurance Policy?
The process of recovering funds is possible and is proving successful for an increasing number of clients. The table below outlines the main steps:
| Step | Action |
| 1 | Analyze and terminate the contract. Check clauses related to conditions of termination and payments connected with it. |
| 2 | File a complaint with the insurer – submit a formal demand for payment. |
| 3 | File a complaint with the Financial Ombudsman – if the insurer rejects your claim. |
| 4 | Lawsuit – it is often necessary, but usually ends with a positive outcome for the client. |
What is important, the consumer’s claims related to the investment-linked life insurance policies expire after 6 years. Yet, this period is counted only from the moment the customer could have realized that the provisions of the agreement violated his rights. This means that in most cases, the limitation period has not yet expired. Therefore it’s worth reviewing your contract and considering a claim for unjustly collected funds.
Investment-Linked Life Insurance Policy – Common Mistakes
When fighting to recover money from an investment-linked life insurance policy, avoid these typical mistakes:
- Not keeping copies of documents –missing contract makes claims difficult,
- Failing to submit a complaint on time –time works against you,
- Giving up after the insurer’s refusal –many clients win in court after a lawsuit.
Investment-Linked Life Insurance Policies – Summary
An investment-linked life insurance policy is a financial product that has disappointed thousands of people. Fortunately, in many cases, it is possible to recover the money even years after the contract was terminated. It is crucial to take the right steps and seek help from experts.
Consult an expert to find out if you can recover your funds. The sooner you act, the better your chances of success!
FAQ – Investment-Linked Life Insurance Policies
What is an Investment-Linked Life Insurance Policy?
A unit-linked insurance contract combining insurance and investment.
Is an Investment-Linked Life Insurance Policy a legal product?
Yes, but many had unfavourable or unclear terms, leading to lawsuits.
How can I recover money from an investment-linked life insurance policy?
Usually through a complaint, the Financial Ombudsman, or a court case.
How much time do I have to file a claim?
Typically 10 years from the contract’s end – but the sooner, the better.
Can I recover all of the money I paid?
Yes, it is possible if the court rules the contract invalid, which is increasingly common.
Do I need a lawyer?
Not always, but the legal help of an expert significantly increases your chances.
Is compensation from an investment-linked life insurance policy taxed?
No, because it’s a refund of your own contributions.
What documents are needed to recover funds?
The contract copy, proof of payments, and correspondence with the insurer.
Can I get my money back years after terminating the contract?
Yes, as long as the statute of limitations hasn’t passed.
Did all insurance companies offer bad Investment-Linked Life Insurance Policies?
Not all, but many major insurers sold products criticized by the Office for Competition and Consumer Protection and courts.