Here’s a concise guide to life insurance policies that include investment options in Sri Lanka — what they are, how they work, pros/cons, what to compare, and steps to pick one.

What these policies are

• Unit-linked life insurance (ULIPs/unit-linked plans): Premiums are split between life cover and investment. Part of your premium buys units in investment funds (equity, bond, money market). The policy value rises/falls with fund performance.
• Participating / with‑profits policies: Premiums are pooled; policyholders may receive declared bonuses (reversionary/terminal) based on insurer profits/returns. These are generally less volatile than unit‑linked products.
• Investment-linked endowments & savings plans: Fixed-term plans that combine a savings/investment component with insurance; payout at maturity or on death.
• Hybrid/regular-premium variable plans: Some insurers offer blended options (guaranteed elements + market-linked element).

How they work (basic)

• You pay premiums (monthly/annually). A portion covers mortality risk and charges; the remainder is invested.
• For unit-linked plans you choose funds or a fund-switching strategy; NAV determines value.
• Withdrawals, surrenders, partial withdrawals, and maturity proceeds are subject to terms, lock-in periods, and fees.
• Charges: mortality charge, fund management fee, premium allocation/initial charge, policy administration fee, surrender charge, rider costs.

Benefits

• Potential for higher returns than plain-term life insurance or bank deposits (depending on market performance).
• Flexible investment choices (fund types, switching, top-ups).
• Combines protection and wealth accumulation in one product.
• Possible tax advantages depending on current Sri Lankan tax rules (verify for your situation).

Risks and downsides

• Investment risk: returns are not guaranteed (especially on equity funds).
• Fees can be high (reducing net returns), particularly in early years.
• Surrender/exit penalties and lock‑in periods may limit liquidity.
• Complexity: comparing across insurers can be difficult due to different charging structures and fund performance histories.

What to compare between products/providers

• Product type: unit‑linked vs participating vs endowment.
• Total expense ratio / fund management fees and all policy charges (mortality, admin, allocation).
• Fund options and historical performance (look at multiple-year returns and volatility).
• Flexibility: premium holidays, top-ups, partial withdrawals, fund switching.
• Death benefit structure (sum assured, maturity guarantee, higher of fund value or sum assured).
• Lock-in and surrender rules and penalties.
• Transparency and reporting frequency (monthly NAVs, statements).
• Ratings and financial strength of the insurer, and regulatory oversight.
• Available riders (critical illness, waiver of premium, accidental death).

Regulation and consumer protections (general)

• Life insurers in Sri Lanka operate under local insurance regulation and must be licensed. Check an insurer’s license and solvency/financial strength disclosures.
• Insurers publish fund NAVs and usually provide regular policyholder statements.

Practical steps to choose and buy

1. Define your goals: short/long term, target corpus, risk tolerance, need for pure protection vs investment emphasis.
2. Estimate the premium you can commit and whether you need flexibility.
3. Shortlist insurers with strong reputations and compare the products’ charges, fund choices, and historical returns.
4. Run a projection (insurer illustration) showing expected fund growth under different return scenarios; ask for a breakdown of charges.
5. Check policy documents for exclusions, surrender terms, and cooling-off period.
6. Consider independent financial advice or consult a licensed insurance intermediary if needed.
7. Keep records, monitor fund performance, and rebalance/switch funds if required.

Common rider options to consider

• Critical illness cover
• Accidental death benefit
• Waiver of premium
• Premium protection during disability

Tax and estate considerations

• Tax treatment can change; confirm current rules with a tax adviser or insurer. Also check how proceeds are treated for estate planning and nominee designations.

If you want, I can:

• Search for and compare current unit‑linked / investment life products from Sri Lankan insurers (I’ll pull up product brochures, fees, and fund performance). This requires me to look up up‑to‑date market details — should I do that?