Insurance Bonds are investment products offered by insurance companies as opposed to fund managers or investment houses. They enable the investor to invest in a wide spectrum of asset classes, therefore increasing the levels of diversification and reducing the investment risk.

For the investor there are several advantages of this approach, including:

Large choice of investment funds, which provides options for either diversification or specialisation

Tax efficient, particularly for higher rate taxpayers and Trusts

Can carry less investment risk than other equity based investment vehicles

Once bonuses/returns have been granted they cannot be taken away

However, as with most investment vehicles, there can also be downsides to such investments, including;

They can be expensive to exit in the first five years, with many companies imposing early redemption penalties.

Even if early redemption penalties are not an issue, many providers reserve the right to levy Market Value Adjusters, which may have a significant effect on the surrender value of the investment.

The main charges are early redemption penalties or the Market Value Adjuster. There will also be annual management charges, but in the majority of cases, the bonuses or returns are simply issued net of all charges and fees.