Whole of Life Assurance Guide

Death is inevitable, that’s why making provisions for your loved ones when you die is so important. If you were to suddenly pass away, would your partner and/or children be able to cope with the loss of your earnings?

Whole of Life Insurance offers protection for this very scenario. Find out more about how these policies work.

What is Whole of Life Insurance?

This type of life insurance product is also known as ‘Life Assurance’ because the sums paid out will be ‘assured’ (provided you keep up with your premiums), upon your death. This type of policy is also colloquially known as ‘Permanent Life Insurance’.

With these policies, the sum can be released as one big payment to your will beneficiaries. You can, of course, choose the amount of money you would like to be covered for. And, you can also choose to pay your premiums on a monthly or annual basis. You can even find policies where you can pay your premiums in one lump-sum payment.

Whole of Life Insurance policies can also include an investment element, where your sum assured can be influenced by how well your invested assurance premiums perform. This can also be known as ‘Unit-Linked Whole of Life Insurance’. Unit-Linked Life Assurance policies will typically split your premiums to pay for the policy directly, as well as pay for the percentage that is to be invested. Unit-linked policies will be reviewed for their performance regularly. So, policyholders will have some idea of how their units are doing, in relation to the value of the policy and the sum assured it needs to provide. It is at this stage that you may be asked to either increase your monthly premium payments or lower the amount of money you would like assured at the end of the policy.

With-Profits Whole of Life Assurance is another variation of a Life Assurance policy which includes an investment element. Here, the money is pooled with other investor funds, which are then used to invest in shares, bonds, property etc. You may then receive an annual bonus from your funds, which can then be added to your assured lump sum.

Please note: You can also find Whole of Life Assurance policies where no investments are included.

Why Should You Consider Getting Whole of Life Insurance?

  • If you have a partner or children who are dependent on your income, you may want to take out life insurance, to ensure that your bills and debts can be paid in your absence.
  • Life insurance, as a whole, costs more in premiums the older you get. This is why many people consider taking out this insurance when they are younger and in better health.
  • If you are elderly, have paid off your mortgage and have grown up children, you may be able to find a cheaper alternative to Whole of Life cover. However, you may want to take out this insurance to meet your future inheritance bill. This is why it may be best to speak to a financial advisor before you consider taking out a Life Assurance policy.
  • You can choose to take out a whole of life assurance policy on yourself or another person, including a business partner, if you can demonstrate that you have a financial bond with the other person/s.
  • If you choose to insure more than one person, the policy will normally payout on the first death. Although, you can get policies which payout on the last death.

If you would like to find out more about Life Insurance, take a look at our guide to the many different types. And if you have any questions, try looking at our Life Insurance FAQs.

What are the Benefits of Whole of Life Assurance?

  • Upper Age Limits – With some Whole of Life policies, there may be a cut-off age where you will no longer have to pay premiums for your family to see a payout upon your death. This could be from over the age of 85, for example. This is great for those who have been paying in over a long period of time.
  • Policy in Trust – By writing your life insurance policy In Trust, you can speed up the process of getting your lump-sum payment over to your loved ones. With the help of an expert, you set up the policy to be maintained by trustees. This may include your name as a trustee and other will beneficiaries. The trustees will then be responsible for maintaining the trust (this means you paying into it with your monthly premiums). When you die, the other trustees then become owners of the trust, they can then transfer the funds directly to your will beneficiaries.
  • Investment Performance – If you opt for a whole of life policy with an investment element, you have the chance to possibly increase the amount of money assured at the end of the policy.

Let’s Look at a Whole of Life Insurance Example:

Damien is 35 years old and is looking for a Whole of Life Insurance policy to cover £100,00 as his sum assured. He has chosen a policy which costs him around £1,500 a year in premium payments and he will be expected to pay his premiums up to his 90th birthday.

Damien is taking out the Whole of Life policy because he has a wife and three young children. His estate, including his home, totals £450,000. And so, as his assets are worth more than £325,000, his estate will be liable for inheritance tax charged at 40%. By placing his policy in trust, his family can use the sum-assured to pay the inheritance bill.

What are the Pitfalls of Whole of Life Assurance?

  • Greater Costs – Whole of Life policies cost more to maintain than term life insurance and other life insurance products. This is because insurers pay out at the end of the policy.
  • Investment Failures – If you opt for a unit-linked or with-profits policy, you may find that the investment element performs under your expectations. It is also possible that the bonus funds added could be taken away again. This may be the case if you surrender your policy early and the company runs a Market Value Reduction to your policy. Or in times of financial crisis on a national, or global, scale.
  • Pay More In Than you Get Out – If you surrender your policy early, you may find that you have paid in more than you get out as an assured sum. Some providers may also charge you for exiting early. Therefore, you should think of this product as a long-term investment and weigh up your options carefully before you buy.

What are the Alternatives to Whole of Life Insurance?

  • Term Life Insurance – These policies will protect your finances for an agreed period of which you’re paying premiums. These may be suited to those who have a mortgage still to pay off. With these, you have options as to whether you would like to decrease the sum assured gradually over the life of your policy, in exchange for lower premium payments.
  • Savings – If you are looking for a way to pay for your own funeral costs, you may want to look at setting up a savings account. Alternatively, pre-paid funeral plans can help you organise and pay for your own funeral in advance.

Speaking to a Whole of Life Insurance expert can help you find the best, most affordable plan for your needs. By filling out this short form, you can get a free, no-obligation quote for Whole of Life assurance. Get in touch now.

I needed life insurance and critical illness for myself and my wife. I got a number of quotes from some of the big brands and was very happy with the final price. Mike Davidson, Birmingham

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