Whole of Life insurance plans guarantee to pay out a specified level sum regardless of when the insured person dies, as long as premiums have been paid and the plan is still in force. The premiums are usually fixed and will not change throughout the policyholder’s life.
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.
Providers of this type of insurance will assess an application and offer terms based on:
- The applicant’s age.
- Their medical history.
- The amount of cover required.
- The applicant’s hobbies, interests and lifestyle and occupation.
Where is such a plan used?
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 beneficiries 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.