“Whole of Life” Insurance – Never heard of it?
Most people don’t take out “Whole of Life” (or “Whole Life”) Insurance, so it’s not very well known. Far more popular is “Term” Insurance — which can be between five and ten times cheaper.
What’s the difference, then, between Whole of Life insurance and Term Insurance? Simple. Term Insurance runs out after a set period. After that period, the policy will pay out nothing when you die and cannot be cashed in. The whole of Life insurance, on the other hand, is guaranteed to last as long as you do. Your beneficiaries will get paid whenever you die.
Lasts as long as you do
This benefit is what distinguishes Whole of Life Insurance from Term Insurance. No matter what happens, your beneficiaries will receive a payout with Whole of Life. You don’t need to worry about a term running out with the policy being worthless after that term. The whole of Life offers real, but expensive, peace of mind.
Use to pay Inheritance Tax
A common way to ensure that your beneficiaries don’t pay UK Inheritance Tax (IHT) on the assets you pass on to them is to use a Whole of Life policy payout to cover the IHT bill. A technical necessity here is that the policy has to be written in trust, or it becomes liable to Inheritance Tax itself. As you would expect, the policy is generally arranged so that the payout amount matches the anticipated IHT bill.
Dividends not taxable
This applies with policies with an investment element and makes a big difference over the long-term, particularly if the policy is set up to reinvest any dividends.
Insurance guaranteed for life
Once the ink is dry on your policy, that’s it! Your policy stays in place until you die, or choose to surrender it. And your provider is likely to be sympathetic in the event of you being diagnosed with a terminal illness, with some consumers being allowed significant proportions of their death benefit early.
Principal Protection
With a Term policy, the money you have invested is not redeemable after the term is up. With a Whole of Life policy, some degree of principal protection is available but, if you surrender your policy, you will have to pay exit fees which may mean you do not get back all you have put in.
Flexible payment plans
Policies differ over when you stop paying in. With some plans, you can stop paying when you reach a certain age although cover continues indefinitely. With other plans, you carry on paying indefinitely (although the premiums are likely to be smaller). Choosing between the two might boil down to what level of premium you can afford.
For more information, please contact me. I will be happy to help with whatever questions you have.
Rob
W:www.rgwealthsolutions.com T:(+6) 011-51565649 E:robert.gourlay@holbornassets.com
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