Whole of life insurance

The whole of life insurance provides cover for the whole of your life. You pay a premium each month and, in return, the policy pays out a lump sum when you die.

With the whole of life policies, the insurance provider invests your premiums into a life fund that spreads its investment across the stock market, bonds, property and cash. It then uses the fund to pay out when customers die.

The whole of life insurance pros and cons

A key benefit of the whole of life insurance cover is that you are guaranteed a payout because the policy lasts for the whole of your life.

But an important thing to remember is that if the fund’s investments perform poorly and the provider is concerned that there is not enough money in the pot to cover everyone’s payouts, you may be asked to increase your premiums – despite the fact that the cover you receive stays the same.

Controversy over cuts to cover

In the first half of 2016, the financial ombudsman received thousands of complaints about the whole of life policies. Part of the reason is that many companies are slashing the levels of cover their schemes offer while asking customers to pay the same premiums.

This is because premiums and sums assured are reviewed, usually after 10, 15 and 20 years.

Many customers who already have the whole of life policies feel they were not properly informed about the reviews and thousands were understandably annoyed when they received letters informing them about cuts to their cover.

It’s important to understand exactly how a life plan works before you take it out so make sure you speak to potential insurers about cover and premium reviews.

If you have been hit with a reduction to your cover it may be worth looking at increasing your premium to get more cover or just shopping around for another provider or type of policy.

How much does whole of life insurance cost?

It is possible to arrange whole of life insurance cover from around £10 per month but many things affect how much you will pay, for example, your age, sex and health and whether or not you are a heavy drinker or smoker.

Basically, the higher the risk of dying young, the higher the premium you will pay. Typically women pay less because they often live longer.

The total cost of plans also depends on whether payments stop at a set age or continue indefinitely. If you continue paying premiums until you reach the grand old age of 100, for example, you may find that your cover has come at a high price!

Online quotes provided by comparison websites don’t always take this into account so make sure you click through to read the full policy details for each life insurance company.

Comparing whole of life insurance with term life insurance

The majority of people who pay for life insurance opt for term insurance that runs for a set period of time and often they are right to do so.

Term insurance is usually a lot cheaper than the whole of life cover and many people in their 60s, 70s or 80s have much less need to provide life cover for loved ones.

The main reason that people take out the whole of life cover is to help cut their family’s inheritance tax bill (IHT). If you take a whole of life cover policy and write it into trust, your beneficiaries receive a tax-free cash lump sum that they can use to pay the IHT bill.

Tax planning is complex, however, so always think about taking specialist advice about how to put life insurance in trust.

For more information, please contact me. I will be happy to help with whatever questions you have. www.rgwealthsolutions.com +6011-51565649