Whole of Life Assurance
With a whole of life insurance policy, you can guarantee your dependents a pay-out in the event of you death, without having to worry about whether or not you die within a fixed term.
Increased peace of mind generally comes with an increased price tag but these kinds of policies can be worth the extra money.
What is whole of life cover?
Whole of life policies, also known as life assurance, are policies that assure a pay-out on the death of the insured party, no matter when this occurs.
This is different to term life insurance, whereby you are only covered during a period of time set at the policy’s opening. Term insurance is arguably more popular as it is cheaper but there are several aspects of whole of life cover that make it preferable to some.
Should I get whole of life cover?
If you are 75 years old and want to purchase life insurance, you’re probably better off with a fixed term policy, as you will benefit from better prices, and are unlikely to need cover beyond, say 25 years.
If, however, you are younger, and want to guarantee a good inheritance or to make sure that your family can keep up with daily expenses as well as any household debts, then a whole of life policy might just you the peace of mind you need.
Whole of life cover does cost more than other forms of life insurance, given the fact that a pay-out is guaranteed.
However, you get what you pay for in that with such a policy there is no doubt that, unless you change the policy of course, your family will receive sufficient financial support should the worst come to pass.
The way in which the premiums are charged will vary depending on the provider in question but often whole of life policies come with fixed premiums.
This means that the amount you pay (as well as the amount of cover you receive) stays the same throughout the duration of the policy. Sometimes, you will only have to pay up until the age of, say, 70, after which the cover will continue but for free.
Other whole of life policies might come with reviewable premiums, that are subject to change at semi-regular intervals based on either changes in your health status or in the insurance market generally, including influences of inflation.
When you take out a whole of life policy, you’ll generally have the option of cashing it in at any point and in return you’ll receive what is known as the surrender value.
This won’t be as much as the full policy value, especially if you do this early on, but it’s good to know that the option is available.
Always check with your provider and read the policy small print to find out whether you have this option and what kind of surrender value you can expect if so.
Writing a Policy in Trust
Those setting up a whole of life insurance policy in order to guarantee a solid inheritance for their children might want to consider writing the policy in trust. This means that when it pays out, it goes directly into a trust rather than being distributed among dependents after probate has been granted to an executor.
The trust is looked after by a designated trustee until the intended recipient (or beneficiary) reaches an appropriate age, say 18.
The key benefit of this is that not only do you get to avoid lengthy probate procedures, but also, since the money never enters your legal estate, it will not count towards your inheritance tax threshold, potentially saving your children a lot of money in tax.
Compare Whole of Life Insurance Policies
To get the best deals on whole of life insurance policies you should be comparing prices online. Use our life insurance comparison service and you’ll have your pick of the best quotes on the market.