What is Whole of Life Insurance?

Whole of Life Insurance pays out a lump sum whenever you die, provided your premium payments are up-to-date. Because we all have to go sooner or later, it is inevitably more expensive than term insurance, which only provides cover over an agreed number of years.

The proceeds of Whole of Life Insurance are not liable to inheritance tax as long as the policy is held in trust. It is vital to take advice about setting this up. But the cash sum payable on death can be used to pay any outstanding inheritance tax on the estate of the deceased.

Inheritance tax is currently charged on at 40 per cent on all assets above a £325,000 threshold, although with careful planning this threshold can effectively be doubled to £650,000 for a couple.

Do I need Whole of Life Insurance?

Whole of life insurance is usually taken out by people who are looking to reduce the potential burden of inheritance tax on their families or other beneficiaries named in their will. It provides a lump sum which can be used to pay off inheritance tax, thus preventing assets such as a much-loved family home from having to be sold to foot the tax bill. Others may simply wish to invest in whole of life insurance as a way of leaving an inheritance; this may be especially important if the policy holder wishes to secure the long term financial future of a family member who has a serious disability.

What types of Whole of Life Insurance exist?

There are two main types of Whole Life Insurance:

  • Balanced cover – A proportion of your monthly premium is paid by the insurer into an investment fund. The remainder is saved and put towards your sum assured. If the investment fund performs well then in theory your premium payments will remain unchanged. If the fund performs poorly then it may be necessary to increase premiums.
  • Maximum cover – This can be cheaper at first if you are relatively young and healthy. A smaller proportion of premiums is initially paid into investment funds, and premiums are usually guaranteed not to increase during the first ten years of the policy. However, they are then likely to rise as you get older. Alternatively, premium payments may remain the same but the level of cover will be reduced.

If you’re interested in whole of life insurance, why not give Better Protect a call on 0203 540 1667 or request a quote using our online form. We offer friendly, expert assistance over the phone and a member of our fully trained team will call you back to discuss your needs more fully. We’ll find the most suitable policy for you and get you the best-possible discounted deal.