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HMRC internal manual

Inheritance Tax Manual

Life Policies: types of policy: with-profits policy

A with-profits policy is one in which the policyholder receives benefits over and above the initial amount set out in the policy. They are in effect sharing in the profits the insurance company makes on its investments.

The premiums for with-profits policies are more than for non-profit policies.

Profits are allocated in the form of bonuses which are normally declared each year and depend upon the insurance company’s investment performance. Normally the bonuses are not payable until the benefits under the policy are payable. However some with-profit policies contain an option to surrender bonuses before the policy matures.