Which of the following describes an advantage of a unit-linked policy over traditional life assurance?

A unit-linked policy has a distinct advantage over traditional life assurance primarily due to its investment growth potential linked to market performance. This type of policy allows policyholders to allocate their premiums to various investment funds, enabling them to benefit from the potential appreciation of the assets in those funds. As the market performs well, the value of the units increases, providing the policyholder with the possibility of higher returns compared to traditional policies, which typically offer fixed benefits and are not directly tied to market performance.

This structure empowers investors with flexibility and the opportunity for capital appreciation depending on their investment choices and market conditions. While traditional life assurance may focus on providing guaranteed returns and benefits, a unit-linked policy leverages the dynamism of the financial markets, aligning the insurance component with investment potential, a feature that is particularly appealing to those who are comfortable with investment risks and looking for growth opportunities.