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Whole of life insurance, also known as whole of life assurance, provides the assurance that your chosen insurance provider will deliver a lump-sum payment to your family upon your passing, regardless of when that may occur.
What is Whole of Life Insurance?
This insurance offers lifelong coverage, ensuring your loved ones are protected for your entire life as long as you keep up with premium payments. Unlike term life insurance, which has a specified coverage period, this policy doesn’t have a predetermined term. With term life insurance, if you pass away after the policy term ends, your beneficiaries won’t receive a payout, regardless of the premiums you’ve paid. This makes lifelong coverage a more reliable option.
With a whole of life insurance policy, you pay either monthly or annual premiums. This policy remains in effect as long as you continue to make these premium payments.
You have the choice between:
- Reviewable premiums: Reviewable premiums typically start low but can be subject to periodic reviews, potentially resulting in increased payments.
- Guaranteed premiums: Guaranteed premiums may initially be more expensive but remain constant throughout the policy’s duration.
How much does a Whole Of Life Insurance cost?
Whole of life insurance typically commands a higher premium than term coverage, given the certainty of an eventual payout. Various factors influence the cost of your premium, such as your:
- Age: Starting the policy at a younger age generally results in a more affordable premium.
- Desired Coverage Level: The higher the pay out you desire for your beneficiaries, the greater the premium.
- Medical History: Existing health conditions can impact your premium.
- Lifestyle: Certain lifestyle choices, like smoking, may raise your premium.
- Occupation: Your occupation, particularly if you’re still actively working, can influence the premium amount.
It’s essential to consider whether you can manage premium payments after retirement, as they must continue until your passing or an advanced age.
* Potential Pay out Amount:
The exact pay out your beneficiaries will receive depends on the specifics of your policy. If you opt for a with-profits or unit-linked policy, the pay out can fluctuate based on the performance of the underlying investments.
A whole of life policy can prove valuable if you:
- Wish to provide your family with a lump-sum payout upon your passing.
- Seek a payout that can assist in covering inheritance tax obligations.
- Desire coverage for funeral costs, legacy planning, or supplementing a partner's lost pension.
- Are prepared to pay potentially substantial premiums, which could increase in the future.
However, if you primarily require coverage for a defined period, a term life insurance policy may be more suitable. When contemplating a whole of life policy, it’s wise to consult a financial advisor to ensure it aligns with your needs. They can also elucidate the associated investment risks and potential payout variations.
Types of Whole of Life Policies.
Whole of life insurance comes in three primary forms:
Over 50s Guaranteed Acceptance Cover:
Tailored for individuals aged 50 and over. This coverage doesn't require a medical questionnaire. All applicants are accepted. It can be advantageous for those with existing health conditions or those seeking coverage for funeral expenses. There may be a waiting period of 12 to 24 months before full coverage takes effect.
Whole of Life:
This lifelong coverage involves a review of your medical history during the application process, making it suitable for individuals in good health.
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Mr Gower was very professional and found the right cover for me. He was polite and engaged in conversation, explained everything easily.
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Frequently Asked Questions
Yes, you can. A joint life insurance policy covers two individuals and provides a single payout after the first person’s passing, leaving the surviving individual uninsured. While joint policies may have lower premiums than two separate single policies, it’s essential to evaluate whether separate life insurance policies might better suit your specific circumstances.
While it’s possible to find whole of life insurance even with pre-existing medical conditions, it may result in higher premiums, with fewer providers willing to extend coverage. If you are over 50 and have health concerns, over 50s life cover guarantees acceptance, regardless of your health status. However, there’s typically a 12 to 24-month waiting period before you can make a claim, during which the provider will refund your premiums if you pass away. Always be forthright about your health and lifestyle when applying for life insurance to avoid policy cancellation should important health information be discovered later.
Certain investment-linked policies allow early cashing in for a reduced payout before your demise. However, this may incur substantial charges and penalties, potentially resulting in a payout less than your total premiums paid. Thoroughly examine the policy’s terms and conditions to comprehend the potential financial impact of early cashing in.
Assuming your cause of death adheres to the policy’s terms and conditions, and you’ve provided accurate information during the application process while maintaining premium payments, the payout should be guaranteed.
Note: It’s crucial to review the covered causes of death, as insurance providers have their unique terms, exclusions, and limitations. Example – deaths resulting from alcohol or drug abuse are not covered.
When your family receives a lump-sum payout after your passing, they are not subject to capital gains tax or income tax on the sum.
*However, if the total value of your estate surpasses inheritance tax thresholds, a 40% inheritance tax may apply. Placing the policy in trust can safeguard the life insurance payout from inheritance tax.
Yes, you can. A joint life insurance policy covers two individuals and provides a single payout after the first person’s passing, leaving the surviving individual uninsured. While joint policies may have lower premiums than two separate single policies, it’s essential to evaluate whether separate life insurance policies might better suit your specific circumstances.
While it’s possible to find whole of life insurance even with pre-existing medical conditions, it may result in higher premiums, with fewer providers willing to extend coverage. If you are over 50 and have health concerns, over 50s life cover guarantees acceptance, regardless of your health status. However, there’s typically a 12 to 24-month waiting period before you can make a claim, during which the provider will refund your premiums if you pass away. Always be forthright about your health and lifestyle when applying for life insurance to avoid policy cancellation should important health information be discovered later.
Certain investment-linked policies allow early cashing in for a reduced payout before your demise. However, this may incur substantial charges and penalties, potentially resulting in a payout less than your total premiums paid. Thoroughly examine the policy’s terms and conditions to comprehend the potential financial impact of early cashing in.
Assuming your cause of death adheres to the policy’s terms and conditions, and you’ve provided accurate information during the application process while maintaining premium payments, the payout should be guaranteed.
Note: It’s crucial to review the covered causes of death, as insurance providers have their unique terms, exclusions, and limitations. Example – deaths resulting from alcohol or drug abuse are not covered.
When your family receives a lump-sum payout after your passing, they are not subject to capital gains tax or income tax on the sum.
*However, if the total value of your estate surpasses inheritance tax thresholds, a 40% inheritance tax may apply. Placing the policy in trust can safeguard the life insurance payout from inheritance tax.
