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What you need to know about whole of life insurance

Whole life insurance, also known as whole of life assurance, is life insurance cover that stays in force for the whole life of the insured person’s life. It often requires you to pay premiums into the policy every year. Historically, whole of life assurance was the only insurance cover offered for many years. However, insurers have since moved into providing life cover that does not have a cash value. Whole of life insurance is a way to provide your loved ones with financial cover for the rest of your life.

How it works

Whole of life insurance policies work with the cash value of the premiums you pay into the cover over the life of the insurance. The investment growth of the funds paid into whole of life assurance is generally dependent on how much premium is deducted to pay for the cover. If for whatever reason you decide to surrender your insurance plan at any point during the term of the insurance, you would be entitled to receive back an amount of the premiums you have paid.

If, on the other hand, you were to die whilst the whole of life insurance policy was in force, then your insurance company would have to pay out an amount of the cover just like a normal life insurance policy. Whole of life insurance can also be used where your estate exceeds £325,000 as part of your Inheritance Tax Planning, as per the 2011/2012 limit. Premiums paid for the whole of life assurance are usually first reviewed after 10 years and then annually or after every 5 years thereafter.

Benefits of whole of life insurance

There are significant benefits that the cover offers:

  • You are assured that your loved ones will get a cash sum upon your death.
  • The cover does not usually have a cash-in value, although you may be required to pay a small. cash-in value if you choose a limited premium term or to pay a single premium.
  • You have the option to put your plan in trust to help with inheritance tax planning.
  • You can choose the annual option to increase your cover and premium by 5% a year at the start of your plan, which helps protect you against inflation.
  • Whole of life assurance premiums are also usually flexible and affordable.

Bottom line

If you want to secure the financial status of your loved ones after you die, whole of life insurance can help you make it happen. It will make a real difference in paying university fees, inheritance tax and other everyday expenses after you die. The plan gives you lifelong cover and is easy to apply. Simply give a life insurance company a ring and the company advisors will answer all your questions and help you with your application. The best part of whole of life assurance is perhaps the peace of mind it gives you knowing the financial security of your loved ones is secured even after you die.

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