Whole of Life insurance
What is Whole of Life insurance?
Whole of Life insurance guarantees the payout of a lump sum whenever the policyholder dies, so long as the monthly premiums are maintained. Under whole of life cover, some of your monthly premiums are invested by the insurer into life funds. This means that both your premiums and your sum assured – which is the money paid out to your beneficiaries can change.
What are the different types of Whole Life insurance?
Whole of Life insurance cover comes in two main forms – maximum cover and balanced cover.
Balanced cover is the most popular form of whole of life insurance. Under this kind of policy, half of the premiums you pay to the insurer each month are paid into an investment fund. The other half are saved and put towards your sum assured.
Maximum cover is when the initial premiums (as well as the sum assured) are guaranteed not to increase for the first 10 years of the policy. After this initial period, the plan is reviewed and, if it becomes necessary, the premiums may go up.
What are the advantages and disadvantages of Whole Life cover?
Whole of Life cover comes with distinct advantages and disadvantages.
The most obvious advantage of whole of life cover is that it pays out whenever you die. This is not like term life insurance which only pays out during an agreed term. Conversely then, the disadvantage of this is that the premiums will be more expensive, and will take a bigger slice out of your monthly income.
Whole of life policies are only suitable if you can afford to be flexible about the eventual payout to your dependants. If you can’t, a term insurance policy will be a better option.