What is a Whole of Life insurance plan? Unlike most life insurance contracts, these types of policy will always pay out when the insured person dies. The plans differ from most other forms of life insurance as the cover does not end at a given date (the end of a ‘term’) and therefore the plan guarantees to pay a pre-determined some at some point in the future – hence the name relating to the provision of cover for the whole of the policyholder’s life.
They guarantee to pay out the specified benefit regardless of when the insured person dies, as long as premiums have been paid and the plan is still in force. The premiums for the plan are usually fixed for a certain period, typically 10 years, but may then rise as the insured person gets older. Thereafter frequent reviews of the cover and cost will take place. The insurer will also price the plan according to the new age of the policyholder, their own claims experiences, and the running costs of the plans. If a rise in premiums at a review are requested, an alternative to paying more might be to reduce the level of cover.
Providers of this type of insurance will assess an application and offer terms based on:
<li>The applicant’s age.</li>
<li>Their medical history.</li>
<li>The amount of cover required.</li>
<li>The applicant’s hobbies, interests and lifestyle and occupation.</li>
<strong>Where is such a plan used?</strong>
Due to the guaranteed payout these Whole of Life insurance plans are useful where there is a need or desire to have a definite benefit paid to someone upon death, whenever this should occur. This may be to leave money to family, other beneficiaries or to cover funeral costs. In some cases it can be used to provide for the payment of inheritance taxes upon death, leaving more of the estate intact for beneficiaries. It is common to see plans put into a Trust arrangement (a legal procedure to transfer the ownership of benefits away from the policyholder and estate) to ensure the benefits in payment are not themselves subject to inheritance tax.
<strong>THE PLAN MAY HAVE NO CASH IN VALUE AT ANY TIME. IF PREMIUMS ARE NOT MAINTAINED THEN COVER MAY LAPSE</strong>