WHAT IS A WHOLE OF LIFE INSURANCE POLICY?

What is a whole of life insurance policy?

Whole of life insurance is a plan that promises to pay a certain amount of money to your family when you pass away, no matter when that is.

It’s like a safety net that lasts your entire life, as long as you keep paying the money for the plan (called premiums). This is different from term life insurance, which only covers you for a set time, like 20 or 30 years.

If you have term life insurance and you die after the time is up, your family won’t get any money, even if you paid into it for a long time. But with whole of life insurance, they’ll always get the payout.

How does a whole of life policy work?

Whole of life insurance works like this: you pay a certain amount (a premium) every month or year. As long as you keep paying, the insurance covers you.

When setting up your policy, you can choose between two types of premiums:

1. Reviewable Premiums: These start off low but can go up over time because the insurance company reviews and adjusts them periodically.
2. Guaranteed Premiums: These might be higher at first, but they stay the same for the entire time you have the policy.

When you pass away, the people you choose (your beneficiaries) will get a payout from the policy.

Some whole of life policies let you pay for just a set number of years or until you reach a certain age, like 90. Even if you stop paying at that point, the coverage continues until you die.

What types of whole of life policy are there?

There are three main types of whole of life insurance:

1. Over 50s Guaranteed Acceptance Cover: This is for people over 50 and doesn’t ask health questions. Everyone gets accepted. It’s good for those who might have health issues or want to cover funeral costs. But be aware, there might be a period (like 12 or 24 months) after you sign up where you’re not covered yet.
2. Whole of Life Pure Protection: This type lasts your whole life, but the insurance company will look at your medical history first. It’s a good fit for people who are in good health.
3. Whole of Life Investment-Linked: There are two kinds here:
   • With-Profits Policies: Your premiums are invested by the insurance company, hoping to make enough money to cover the pay-out when you die.
   • Unit-Linked Policies: You get to choose specific investment funds where your premiums are invested.

Each type of whole of life insurance has its own features and suits different needs, especially regarding health conditions and how you want your premiums to be used.

How much does whole of life insurance cost?

Whole of life insurance generally costs more than term insurance because the insurer knows they’ll definitely have to pay out someday.

The cost of your monthly or yearly payments (premiums) depends on several things:

• Your Age: Starting a policy when you’re younger usually costs less than when you’re older.
• Cover Level: The more money you want to leave for your family (beneficiaries), the higher your premiums.
• Medical History: Any existing health conditions you have can affect the cost.
• Lifestyle Factors: Habits like smoking can increase premiums.
• Occupation: If your job is still active and especially if it’s risky, it might affect the cost.

Also, think about whether you can afford to keep paying the premiums even after you retire, as you need to pay them until you die or reach a certain age like 90.

How much could a policy pay out?

The amount your whole of life insurance policy pays out to your loved ones depends on your policy details:

Policy Terms

If you choose a policy that offers a large lump-sum payment, expect to pay higher premiums.

Investment Performance

For with-profits or unit-linked policies, the payout size can vary. It might be more or less than you originally planned, based on how the investments tied to your policy perform over time.

Is whole of life insurance worth it?

Whole of life insurance might be a good choice for you if:

• You want to make sure your family gets a lump sum of money when you pass away.
• You’re looking to provide funds that could help with an inheritance tax bill.
• You aim to cover funeral expenses, leave a legacy, or support your partner financially if you’re not around.
• You’re okay with paying higher premiums, which might even go up depending on the policy.

But, if you need insurance just for a certain time, like until your kids grow up, a term life insurance might be better.

It’s smart to talk to a financial advisor if you’re thinking about whole of life insurance. They can help you decide if it’s right for you and explain how any investments linked to the policy might affect the payout.

Is a whole of life insurance pay-out tax free?

When your family gets the lump-sum payout from your whole of life insurance after you die, they don’t have to worry about paying income tax or capital gains tax on it. But, if the total value of everything you leave behind (your estate) is above the inheritance tax thresholds, they might need to pay inheritance tax, which can be 40%.

A good way to avoid this is to put your life insurance policy in a trust. This means the payout from the insurance doesn’t count as part of your estate for inheritance tax purposes.

Is whole of life insurance guaranteed to pay out?

Yes, whole of life insurance is generally guaranteed to pay out, but there are a few key conditions:

• Your death needs to fall under what the policy covers. It’s important to know what’s included and what’s not.
• You must have been truthful about your health and other details when you applied.
• You need to keep up with all your premium payments without missing any.

Before getting a policy, it’s crucial to look at what causes of death are covered. Each insurance provider has different rules and might exclude things like deaths related to alcohol or drug abuse.

Can I cash in my whole of life insurance policy early?

If you’re considering cashing in your whole of life insurance policy early, particularly if it’s investment-linked, it’s possible to do so.

However, this decision comes with significant financial considerations. Cashing in early typically means you’ll receive a smaller payout than the total death benefit your policy would provide upon your passing.

Additionally, early withdrawal often incurs high charges and penalties, which could result in you receiving less than the total amount of premiums you’ve paid over the life of the policy.

It’s crucial to carefully read and understand the terms and conditions of your policy to be fully aware of the financial implications of cashing in early.

Should I get term or whole of life insurance?

When deciding between term insurance and whole of life insurance, it’s important to understand the key differences and how they align with your financial goals and circumstances.

Term Insurance

• Costs less money.
• Only gives money to your family if you pass away during the time the insurance covers.
• Good if you need to make sure your family is okay for a specific time, like until your kids grow up.
• Doesn’t have any part where you can invest money.
• You pay the insurance money (premiums) until the policy ends.

Whole of Life Insurance

• Usually more expensive.
• Will definitely give money to your family when you die, no matter when it happens.
• Good if you want to make sure your family always has some financial help.
• Might let you invest part of your insurance money which you can get back later.
• You might stop paying premiums when you reach a certain age or after a number of years.

Can I get a joint whole of life insurance policy?

Yes, it’s possible to get a joint whole of life insurance policy.

This type of policy covers two people and pays out after the first person dies. However, once the payout is made, the surviving person will no longer have life insurance coverage under this policy.

In terms of cost, a joint policy usually costs less than if you were to buy two separate policies for each person.

Can I get whole of life insurance if I’m in poor health?

Yes, you can still get whole of life insurance even if you’re not in good health. A few things to keep in mind:

• More Costly: If you have health issues or a medical condition from before, the insurance might be more expensive.
• Limited Choices: There may be fewer insurance companies willing to offer you coverage.
• Over 50s Life Cover: If you’re over 50, you can look into over 50s life insurance. These plans accept everyone, no matter their health.
• Waiting Period: These policies often have a waiting period of 12 to 24 months. If you pass away during this time, the insurer won’t pay out the full amount. Instead, they’ll just give back the premiums you’ve paid so far.

How can I get whole of life insurance?

To get whole of life insurance, the easiest way is to use CoverMe123’s whole of life insurance form.

By filling out this form, you’ll be put in direct contact with a financial advisor. They will help you find the right policies and rates that best suit your needs.

This way, you can ensure you’re choosing a policy that fits your specific situation and requirements with professional guidance.