Chartered Institute of Stockbrokers (CISI) Professional Practice Exam

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What kind of policy is an investment bond mainly considered?

Insurance policy only
Investment vehicle with insurance characteristics
Pure investment product
Tax-exempt saving scheme

The correct answer is: Investment vehicle with insurance characteristics

An investment bond is mainly considered an investment vehicle with insurance characteristics because it typically combines elements of both investment and insurance. Investment bonds allow individuals to invest in a portfolio of assets, while also providing some level of security through features more commonly associated with insurance policies, such as the potential for death benefits or guaranteed returns. This dual nature differentiates investment bonds from pure investment products, which do not include insurance features, and from insurance policies that primarily focus on providing coverage rather than investment opportunities. The investment aspect of a bond allows policyholders to potentially earn returns on their investment, depending on how the underlying assets perform, while the insurance characteristics provide additional benefits, making it an attractive option for individuals looking to grow their wealth while also securing some financial protection. This blend is what defines it as an investment vehicle with insurance characteristics, highlighting its unique position in financial products.