WHOLE OF LIFE INSURANCE

Learn about how this policy can provide a cash lump sum upon death to your loved ones. This can go towards helping them maintain their current lifestyle, pay funeral costs or be used to cover future education costs. Policies can be put in place for a number of reasons and can be flexibly arranged in line with you and your family’s needs both today and in the future. It is important to note that the lump sum is fixed and therefore inflation will erode the purchasing power over time.

What is a whole of life policy?

The purpose of a ‘Whole of life’ policy is to provide a tax-free cash lump sum to your loved ones after death. Also referred to as life assurance, it guarantees to pay out provided premiums are paid up to date. This differs from term-based insurance policies that only apply for a set period of time.

‘Whole of life’ policies are one of the most comprehensive forms of insurance available in terms of coverage, and is often a suitable way of providing some financial security for your family. There are no restrictions as to how any payouts can be used, making it a flexible way of allowing it to be spent on whatever your loved ones’ needs are at the time.

Policy key features

  • Lifelong protection (unless you decide to cancel your policy).
  • A guaranteed payout after death paid directly to your loved ones (or estate beneficiaries if different).
  • Options on how the policy is invested, and in what proportion.

Why purchase whole of life insurance?

  • Cover Living Costs  
    You want to provide assistance with the costs incurred in raising children on an ongoing basis without solely relying on a single parent’s income only.
  • Funeral Costs
    You want to help pay for funeral costs to relieve your family of the burden during their time of grief.
  • Financial Security
    You want to provide a level of financial security should premature death occur unexpectedly. This is useful for young families whose needs may include ensuring future education costs are covered.
  • Clearing Outstanding Debts  
    You wish to pay off an outstanding mortgage to secure your family’s home, or clearing any other debts.

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Benefits of insuring through us

Tailored policies

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Risk management

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Hassle free

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Provide insights

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Claim settlements

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Some key things to consider

Investment element

When taking out a life assurance policy, they are usually linked to an investment fund. Premiums are collected on either a monthly or annual basis, with a portion being used for investment purposes. The insurer will use the remainder of the payment to operate the policy. Periodic reviews will then take place to assess performance. If the investments are not performing as expected, the insurance company can either increase premiums, or reduce the sum assured.

More expensive

Life assurance is more expensive than other life insurance policies because the claim is inevitable. Therefore it is important to ensure any monthly cost is affordable on an ongoing basis, as premiums will be required to be paid often into your 70’s and 80’s. Most policies are structured that further payments are not required from 80th or 85th birthday, with cover still being provided.

Personal requirements

Whole of life policies are not ideal for everyone. If you are currently in your 80’s you are not likely to need for life insurance due to having no outstanding mortgage, and no dependants. However, some often use life assurance plans in order to provide an inheritance to loved ones, pay for funeral costs or to cover a future inheritance tax bill.

Surrender value

If you no longer wish to contribute towards a whole of life policy, you are usually free to cash in the policy for a surrender value. It is important to note that no further cover will be provided, and the surrender value will be significantly lower than any premiums paid. The largest difference due to the reduction occurs in the early years of the policy being in place and aims to deter people from cancelling.

Costs of Whole of Life Insurance

If you want to provide a level of financial security to your family, a whole of life insurance policy is designed to provide a guaranteed lump sum after you die. This can be an ideal option if you are concerned about the financial consequences of future death, and want to remove any money worries through an insurance product.

In 2015, the average whole of life insurance policy was £5900, with over 99.99% of all claims being paid according to research by the Association of British Insurers.

Writing in trust

The purpose of this type of policy is to pay a lump-sum upon death. Any amounts received will be paid directly into your estate which will then be passed to its beneficiaries. If you total estate exceeds the current nil-rate band of £325,000 a tax charge will be levied for this inheritance, greatly reducing the net benefit of this protection.

One way to overcome this obstacle is to write the policy in trust. Doing this is a relatively simple process and means the people you want to benefit are able to without the issue of an inheritance tax liability present.

Frequently asked questions

Will my premiums change with life assurance?

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Is tax payable on any lump sum received?

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What happens if I do not understand the small print?

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How much should I get insured for?

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When should I consider buying wol?

Whole life insurance is generally used when the need for life insurance is lifelong, or permanent. In addition it has a built-in savings element since you will pay premiums and hence build up a cash value within the policy. Additionally, whole life insurance may be used as a part of your estate planning.

Premiums for whole life insurance can be much higher than premiums you would pay initially for the same amount of term insurance, but they are smaller than the premiums you would eventually pay if you were to keep renewing a term insurance policy until the insured’s later years.

Whole life insurance is a good choice for you if you want to ensure that you have a life insurance policy in place for your entire lifetime and can comfortably afford the premiums, or if it fits within the framework of your estate or retirement plan.

Will premiums remain the same throughout my lifetime?

Generally, in a traditional whole life policy, the scheduled premium payments remain level. Premiums are generally the same (fixed) every year the insured is alive. The premium payment consists of both life insurance protection and savings. These two elements vary over the life of the insured, but the total scheduled premium payment remains the same for the life of the traditional whole life policy. Some traditional whole life policies however provide for a modified premium payment schedule where the required premium payments may be lower in the early years and then increase to a higher amount which will then remain level for duration of the policy. Be sure to check the data page or specifications page of your policy (usually page 3) to determine the amount of your premium payments and the period for which they are required to be paid.

Can I get cover if I am diagnosed with a serious illness?

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How much does whole of life insurance cost?

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Avoiding over-insurance

Working with you, our insurance specialists will help put in place the right level of insurance. Over insurance adds unnecessary costs and does not provide value for money. Common ways to reduce your premiums and retain the right level of protection include:

  • Increase your voluntary excess resulting in greater risk sharing
  • Make upgrades to your property including fitting better door locks and advanced fire alarm systems
  • Insure for the re-build cost of a property and not its market value

READ MORE ABOUT OVER-INSURANCE >

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