29Nov2019

Part Three – Whole of Life Insurance Cover

In our previous two weeks, we have discussed various options of life insurance, including fixed term, decreasing term and joint life policies. These are policies that last for a length of time suitable to the policyholder, for example, to cover the duration of a mortgage, or longer to provide help with university fees or other such financial obligations. In any event, many people find the excess of available policies confusing. They may not have the right policy for their particular circumstances. 

Who needs a whole of life insurance cover?

In today’s part three of our five-part series, we can look at a rather obscure life insurance policy. A whole of life is a policy that will only suit a small portion of the population due to its peculiarities. 

What does a whole of life insurance policy entail? 

A whole of live policy covers an individual for the whole of their life, with a guaranteed payout upon death, albeit at 20 years of age or 120 years of age!

A whole of life insurance policy is life insurance in its purest, most authentic sense. It is a policy that will not expire in the same respect of that of the more popular and general fixed or decreasing term insurance.

For wealthy individuals, in particular, a whole of life policy has a great many financial advantages. For example, it has an option for index linking in line with inflation, and extra security to cover any inheritance tax liability sure to fall due when you die. 

What is the best whole of life insurance policy?

Whole of life has some advantages and, as described above, is popular for individuals who preside over large estates. Another scenario where a whole of life policy is required is in business, also known as key man (or key person.) It covers business partners by companies who would struggle without a “key person”. In the case of key person insurance, there are options to fix the term and to offer a whole of life policy. In any event, it is separate from personal life insurance. It is a way to prevent spouses from having to deal with the business upon the death of the businessperson. Ultimately, the policy is owned and paid for by the company. The insurance allows the company to purchase the deceased person’s shares as well as cover any income lost to the company in the event of the death of the key person.

Are there any advantages of a whole of life insurance policy?

Regardless of the reasons for requiring a whole of life policy, the monthly premiums are costly, and with an abundance of investment options on the market today, are less popular than they were in the 1980s when there was a range of index-linked options to invest funds in the form of monthly premiums and cash in for lump sums. Those policies taken out in the 1980s may be unsustainable today, especially if the policy is one of the many that become subject to reviews. Those subject to reviews when the policyholder reaches 60, for example, may see premiums double. Failure to keep up with premiums, of course, will void the insurance. Today, many policyholders who thought a whole of life policy a good idea back in the 1980s are finding themselves in a difficult situation. Many face unaffordable premiums at a time where a new life insurance policy is unattainable due to age or ill-health.

Other factors that have led to their unpopularity is the range of alternative life insurance options including over 50s and funeral plans. Hence, when a reasonably priced life insurance policy comes to a natural end, there are several alternatives for seniors. Many policies offer competitive prices, allowing individuals to plan for financial security for loved ones. Such plans ensure that loved ones can manage crippling funeral costs with a well-put-together funeral plan. An over 50s policy is a lovely way to bequeath a financial gift as a welcome inheritance, and a pleasant surprise, and goes a long way to ease the burden of losing a loved one.

Get professional advice on what is the best insurance policy for you

Whichever insurance policy you are thinking about, be it whole of life, over 50s, or a funeral plan, speak to a professional advisor today. Get advice on how to find out which policy will suit your circumstances. If you are concerned about inheritance tax, make sure you get professional information about putting your policy into a trust. Our advisors can guide you on this, avoiding probate and ensuring your dependants have a stress free access to finances and avoiding inheritance tax.

Click on the link below to speak to one of our expert advisors, and tune in next week for part four where we will discuss in greater depth policies for over 50s and funeral plans.

 

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