Do I Need Whole-Of-Life Insurance?

Whole-of-life insurance is a policy designed to cover your entire life. It ensures a specified payment upon your death - no matter when it occurs.

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Do I Need Whole-Of-Life Insurance?

Whole-of-life insurance is as it sounds - a policy designed to cover your entire life. No matter when you die, a specified payout upon your death is guaranteed.

Whole-of-life policies are not meant to pay living expenses or settle debts (though they may do if the policy holder dies at a young age). Instead, they are a long-term financial planning tool.

Of course, this guarantee comes with a price. Whole-of-life policies are typically more expensive than term insurance policies, which only provide cover for a specific time frame. The amount you pay will depend on factors like your age and health.

It’s important to weigh up the potential benefits against the cost of premiums to decide if a whole-of-life policy is the right insurance for you.

How do I know if a whole-of-life policy is right for me?

A whole-of-life policy is a type of life insurance that covers your entire life. It’s ideal for anyone looking to leave a legacy to their family, provide inheritance tax provisions or protect their business after they’re gone.

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How does whole-of-life insurance work?

You can buy a whole-of-life policy with monthly or annual payments. If you have deep pockets you could also opt to pay with a one-off sum.

As long as you pay your premiums, you’ll be covered until you die. Some policies may be designed so that you stop paying after a set period or at a certain age.

How can a whole-of-life policy help with my inheritance tax?

When it comes to addressing inheritance tax liabilities, whole-of-life insurance can come in pretty handy. By establishing a policy to cover anticipated taxes, you can ensure that more of your estate is passed on to chosen beneficiaries.

With the right moves (aka placing your policy proceeds outside of your estate and paying premiums throughout your life) you could actually bring down future inheritance tax obligations.

To maximise this benefit, it’s super important to have your policy written in an appropriate trust.

Complicated stuff, right? Inheritance tax liabilities are a complex matter that could really do with professional input and expert guidance.

What is the best policy option for me?

Glad you asked. There are a variety of policies available, each offering distinct benefits and features. Set payout policies, for instance, guarantee a predetermined amount upon death. Alternatively, investment-linked policies base payouts on investment performance through unit-linked funds or with profit policies that offer bonuses.

Some whole-of-life policies require premium payments until death. Others will waive future premiums once you hit a specified age.

Many policies include an investment component and/or a surrender value.

Hang on, what’s an investment component?

Fair question. An investment component just means that your premiums are invested during the lifetime of the policy. This builds up a cash value, which you may be able to borrow against or withdraw.

Policies without an investment component and with guaranteed or investment linked premiums are also available from select providers.

OK, makes sense. What about a surrender value?

So, whilst your cash value is the sum of money that grows in a permanent life insurance policy, surrender value is the actual amount of money you will receive if you try and withdraw all your policy’s cash value. Think of it as a withdrawal clause, that lets you cancel the plan and receive a chunk of cash.

How is my policy protected?

Protection levels are generally guaranteed for the first ten years. After this, a review determines the future of your coverage. If the review finds that your current protection level can be maintained, then it will continue until the next review date.

If the review reveals that the same level of protection can’t continue, you’ll have a couple of choices:

  • Increase your premium payments
  • Keep your payments the same and reduce your level of protection

Whole-of-life insurance policies offer different types of cover. You can opt for maximum cover, which provides a high initial coverage level at a lower premium. Or you could pick standard cover - which balances life insurance with sufficient investment to support the policy in later life.

Margot had hoped to inherit the entire family art collection.

Wouldn’t you prefer to know how to best look after your most precious assets?

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