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If you’ve started a family or just bought a house, it may be time to consider getting life insurance. While some policies only offer cover for a certain period of time, whole of life insurance will protect you for as long as you need.
Find out if whole of life insurance is right for you below.
Whole of life insurance is a comprehensive type of life insurance policy that will cover you for your entire life. In the event of your death, your dependants will receive a lump sum payment, also known as the sum insured.
Unlike term insurance, which only covers you for a set period of time, whole of life insurance protects you for as long as you continue to pay your premium. Where some term insurance will also reduce the size of your sum insured over time, whole of life insurance will pay out the same amount regardless of when you happen to pass away.
You pay your premium each month and are then covered for the full amount of your sum insured for as long as you continue to make your payments.
If you are still insured at the time of your death, your family will receive the sum insured amount.
Whole of life insurance can offer more certainty and peace of mind compared to term life insurance, as your premium and the sum insured remain the same. However, some insurers may review your policy after a certain period of time, for example, 10 years, and may then increase the size of your premium.
Another benefit of whole of life insurance is for families looking to minimise the effect of inheritance tax. This is charged at 40% for assets worth over £325,000, which generally includes your home. Life insurance pay-outs are not taxed, so by taking out whole of life cover as part of a trust, you can help offset the tax you have to pay.
Whole of life insurance is suitable for those who want the security of ongoing cover, and a stable sum insured amount. Unlike term insurance, whole of life insurance offers cover for the rest of your life and may therefore be a more attractive option for those who want comprehensive, straightforward cover.
It may also be suitable for individuals or families with valuable assets that are likely to be subject to inheritance tax.
There are two types of whole of life insurance. These are:
Whole of life insurance covers you in the event that you pass away from an accident or natural causes, including illness and old age.
Like most types of life insurance, there are certain exclusions that will not be covered under whole of life insurance. These include:
As it offers ongoing cover, whole of life insurance can be more expensive than term life insurance. Where some term insurance policies reduce the size of your pay-out over time, whole of life insurance has a sum insured amount that is always the same, which means the cost of your premium will remain high.
There are a number of things you can do to reduce the cost of your whole of life insurance premiums, such as:
Get the right level of cover. Your sum insured amount plays a big role in determining the size of your premium. By opting for a low pay-out amount, you will pay less for insurance.
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