Three years ago, Ark Life shook up the life assurance savings market when it brought out the first PIPS and PEPS low-cost savings policies that were aimed at the 10-year saver. These policies avoided the pitfalls of conventional policies such as high initial charges and commissions, inflexible payment structures and lack of transparency.

Ark and its parent company, AIB Bank, have about 40 per cent of this lucrative PIP and PEP market. Its product has now been imitated by most of the other life companies, remarkably only in the last few months by Lifetime, the other bank assurer.

Last year, Ark Life dropped front-ended charges from its pension policies and its market share grew sharply.

Now the low-cost formula has been applied to its protection policies and the charging structure on its whole-of-life policy. The Flexible Protection Plan, has been dramatically repriced. The costs on term assurance, the Temporary Protection Plan, have been dropped; and a new, guaranteed whole-of-life policy, the Lifelong Protection Plan has been introduced, which undercuts the other three plans on the market.

The Lifelong Plan is probably the most interesting for those thinking about buying life insurance, but who are not quite sure what type to buy. What sets it apart from conventional term cover is that it lasts until death, regardless of current age. In addition, there is no risk of it bombing out this is where in conventional policies high costs and problems with the underlying investment units put the life cover at risk, and the investment value can be used to support the life cover until there is no investment left. Until about 18 months ago, when Irish Progressive brought out the first guaranteed lifelong term-style policy (it has since been joined by Norwich Union and Hibernian) there were only two choices when buying life insurance. There was a conventional term policy, which covered a life for a defined number of years and when the insured died, the sum assured was paid out to the dependants.

If the insured lived beyond the agreed 20 or 30 years (a typical period) the policy ended and there was no cash payout. Term policies are often compared to motor or house insurance because they have no underlying value other than to pay out in the event of a claim.

The other option was a so-called whole-of-life policy which, under certain conditions, provided a cash value if cancelled early. Theoretically, these policies, which cost substantially more than conventional term ones, can last an entire lifetime if the premiums are priced correctly from the start and are regularly reviewed to take into account the policyholder's increasing age and risk of death. But if premiums are not carefully monitored and adjusted, there is a tendency for the underlying investment value to bomb out. At this stage, the client, who is now, say, 20 years older, is told that if continued life cover is required, several times more in monthly or annual premiums will have to be levied. (In one case we highlighted last winter the premium for a 62-year-old man had risen from £40 to £125 a month.)

The scandal about whole-of-life policies is that most customers, who genuinely thought they were buying cover for their whole lives (as well as building up a nest egg), were completely unaware of how unstable their policy was or how high were the charges and commissions.

These new guaranteed lifelong policies eliminate any risk that cover will lapse and are cheaper than whole-of life policies, but this is because the insurers are counting on some people cancelling their policy in the early years, in effect, supplementing those who hang onto them, literally, for life.

As the table shows, Ark Life has undercut the rest of the market quite sharply, with a 30year-old male being able to buy £100,000 cover from the Lifelong Plan for £24.06 a month for the rest of his life. This is £7.57 a month or nearly £91 a year less than someone opting for Hibernian's equivalent plan. A 20year term policy would cost less than £12 a month for the same 30-year-old, but over a lifetime, the impact of inflation on the Lifelong premium (and admittedly on the benefit) still makes the £24 quite reasonable.

Anyone who wants to leave their children a legacy; who has long-term dependants such as a handicapped child or relative; or who does not have an occupational pension or death-in-service benefits to leave to a spouse or dependants should certainly consider one of these policies.

This policy is also quite suitable to provide cover for inheritance tax and can be adapted as a Section 60 approved policy for CAT purposes.

As welcome as Ark's new Lifelong Plan and the lowering of its term rates are, its decision to keep its conventional whole-of-life policy on the books is questionable. It has reduced the nil-allocation period the period during which premiums are absorbed by charges from 15 months to six months, the lowest on the market, but it has not set out specific points at which the policy is reviewed (i.e., every five or 10 years) and instead is leaving it "ad hoc and at the request of the client". Ark's finance director, Mr Brian Wood, told Family Money that Ark and AIB staff have been warned not to sell the Flexible Protection Plan, as the whole-of-life policy is now called, as a savings plan because of the bombing out danger.

"It is very definitely not a savings policy," he said. "It is targeted at the family market, for the person who doesn't really know how long they will need to protect their family."

But as any independent financial adviser will point out, a far better investment return will be built up over a 25- or 30-year period if a cheap term-assurance policy and a standalone savings policy are bought for the same overall amount.

It isn't entirely surprising that Ark Life continues to defend its whole-of-life policy: there are thousands of existing clients, including many who have bought them to offset inheritance tax liabilities, who would be less than pleased if the company suddenly dropped them on grounds of poor value. There is also a natural compunction to maintain what it perceives to be as wide a range of policies as possible in a fiercely competitive market.