Key Takeaways

  • Whole of life insurance, also known as life assurance, guarantees a lump sum payout upon death, providing financial security for your beneficiaries.
  • The benefit amount from whole of life insurance can be used for various purposes, such as covering funeral expenses, settling debts, or addressing inheritance tax.
  • Whole of life insurance policies can be written in Trust to avoid inclusion in the estate and reduce inheritance tax liability.
  • When comparing whole of life insurance to term life insurance, consider your needs and budget. Whole of life insurance offers lifelong coverage but comes with higher premiums, while term life insurance provides coverage for a specific period at a more affordable cost.

What is Whole of Life Insurance?

Whole of life insurance provides cover for your entire lifetime, with a payout to beneficiaries upon your death. It offers financial security, covering funeral expenses, debts, or providing an inheritance. Premiums are paid regularly, and costs depend on factors like age and health.

This is a unique insurance product differing from standard life insurance (level term life insurance). Term life insurance normally ceases to exist at a certain age, or after a set period, whereas Whole of Life insurance does not - it is a guarantee to be paid upon death.

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How can the funds from a Whole of Life Insurance be used?

The funds that are paid upon death can be used however is required. Generally, this is for funeral expenses, inheritance tax, or to settle debts. The money paid upon death will form part of the estate of the deceased. This can increase the value of the estate.

Some Whole of Life policies are used to pay the Inheritance tax liability that could arise, during the 7-year window, after making a gift. These policies are known as Gift Inter Vivos.

Joint Whole of Life Insurance policies

It is possible to have a joint life insurance policy that will cover two people but pays out for one death only. After that, the policy is matured. It is designed in this way to protect the financial future of the survivor.

Do Whole of Life Insurance policies mature?

There are some life assurance policies where you only need to pay the premium for a fixed number of years, or until you reach a certain age. You will still be covered when you die, but you no longer need to make premium payments towards the policy. Therefore, there is no maturity date.

Whole of Life Insurance wait period

Most policies have a wait period, which means that if you die during this set period, your claim will result in only your premiums returned, instead of a full payout. The wait period normally lasts from 12 to 24 months. After this period is when you will be fully insured for the full benefit amount.

Is Whole of Life Insurance expensive?

Whole of Life policies can be expensive as they guarantee a payout. The intention of life assurance is to provide a lump sum after death. However, in some policies, the benefit amount can fluctuate. This is because some life assurance funds are investment products, with a varying benefit amount based on performance. A varying benefit amount means that there is risk involved as the value goes up and down.  

Whole life insurance is usually more expensive than term life insurance because it covers the policyholder for their whole life, with a guaranteed payout upon death. The price of whole life insurance will depend on many things, such as the policyholder's age, health, and way of life. People who are older or have health problems usually pay higher premiums as the insurer will see them as a higher risk.

It’s a good idea to seek advice from a Financial Adviser, or Insurance Adviser to ensure the risks of fluctuating benefits and Inheritance tax are fully understood.

Whole of Life policies in Trust

If a Whole of Life insurance claim is settled, the benefit amount will form part of the estate. That means it can be liable to inheritance tax. A way around this is to have the policy written into Trust.

A Financial adviser can write your policies into Trust when you agree to take them out. Putting Life Assurance into Trust will mean that the benefits no longer belong to you and will not form part of your estate. Therefore, any claim will not be included in inheritance tax calculations.

This is possible because anything which is placed into Trust changes the ownership. In this case, it is used to change the ownership away from you and your Estate and into the name of the beneficiary.

If this policy is to be written under Trust, you will need to decide upon trustees and beneficiaries when you agree to take it out.

Which is better, whole of life insurance or term life insurance?

Choosing between whole of life insurance and term life insurance depends on your needs. Whole of life insurance provides lifelong coverage and higher premiums, while term life insurance offers coverage for a specific period and is more affordable. Consider your goals and budget when deciding. 

Here is a breakdown of how they differ:

Whole of life insurance

This type of insurance provides coverage for your entire lifetime. It guarantees a payout to your beneficiaries upon your death. It can be a good choice if you want lifelong coverage and want to leave an inheritance or cover funeral expenses. However, premiums for whole of life insurance are usually higher compared to term life insurance.

Term life insurance

Term life insurance provides coverage for a specific period, such as 10, 20, or 30 years. If you pass away during the term, your beneficiaries receive a payout. Term life insurance is generally more affordable, making it suitable if you have temporary financial obligations, like paying off a mortgage or supporting dependents until they become financially independent.

Ultimately, the "better" option depends on your goals and budget. If you prioritise lifelong coverage and the ability to leave an inheritance, whole of life insurance may be more suitable. If you want affordable coverage for a specific period, term life insurance could be a better fit. I

Balanced Cover vs Maximum Cover Whole of Life Insurance

A Balanced Cover life assurance policy is where you agree to pay a fixed premium in return for a fixed benefit amount. The premiums will not change, even as you get older and possibly become unwell.

A Maximum Cover life assurance policy is linked to an investment policy and it, therefore, carries the risks of investing. Your insurer will invest your monthly premiums into investment products with the intention of enough growth to be able to cover your payout.

Whole of Life Insurance Advice

When considering whole of life insurance, it's wise to seek advice from insurance professionals or financial advisers. They can offer valuable insights and help you make informed decisions. Discuss your specific needs, financial goals, and budget with them to determine if whole of life insurance is suitable for you. They can guide you in selecting the right coverage amount and explain the implications of premiums and potential cash value accumulation. Additionally, they can assist in comparing policies from different providers to ensure you secure the most suitable and cost-effective option. Obtaining advice ensures that you have a comprehensive understanding of whole of life insurance and helps you make choices that align with your long-term financial objectives.

Some life assurance policies allow you to cash in early, this varies from policy to policy, and you may face high charges to do so. You may get back less than what you have paid into the policy. Be sure to understand the terms of the policy when you decide on one.

It is possible to find life assurance if you have pre-existing medical conditions, or are in poor health. You may have to pay a higher premium as a result of this. If you die before, either a 12 month or 24 month waiting period you will have your premiums returned. Only after the waiting period you will be fully insured.

When assessing if a Whole of life insurance policy is worth it, you should consider the alternative life cover solution - Term life insurance. Term life insurance can generally be cheaper for a like-for-like insured amount; however, this policy does cease upon the maturity date. A whole of life insurance does not have an end date and will guarantee a pay-out. If you need this guarantee as you have a clear reason why your family would need the money, then life assurance/whole of life insurance could be best. The reasons you may need these funds could be for funeral expenses, inheritance tax or to settle debts. It is a good idea to seek advice to review your options and find out more information about the different types of life cover.

Life assurance offers a guaranteed pay out upon death. The policy does not expire. A term life insurance policy only provides cover during the life of the policy. As term life insurance generally covers a shorter period, it can be cheaper than life assurance. This is because there is no guarantee it will be required to be claimed upon. A life assurance policy will pay out so long as full insurance has kicked in; this is after the waiting period. The waiting period can be 12 or 24 months. It depends on personal circumstances to answer which policy is better. Both have their advantages. The key reasons to decide which policy is better for you would be based on your personal circumstances. Other things to consider would be, the reasons you need cover, the length of time you need cover for and your budget. It is a good idea to seek advice to review your personal reasons for seeking a life cover and be presented with your options of the best, most relevant policies.

Life insurance covers you for a set term, this is also known as Term life insurance. A life assurance guarantees a pay out upon death. There is no expiry date to this insurance.



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