With whole of life insurance being so popular in the UK today this guide will help you understand the types of whole life policies and help you select the best one for your needs.
Firstly let’s look at the premiums
Guaranteed Premium: with this type of policy you will be presented with 2 variations
- Your monthly premium will be exactly the same for the period of the policy, you will have to pay the monthly premiums as every policy will have a payment term attached to it.
- Or you will have a specific guaranteed period set out at the start of the policy which is typically 5 years or ten years from when the policy started that the insurance company will review your premiums. At this point it is very likely that your monthly premium will increase so please be aware of this.
This means your whole of life policies premiums can be reviewed at any time by the insurer with a view to being increased.
Reviewable premium policies are almost guaranteed to be the cheapest premium available at the outset of your policy but because they premium can increase and substantially it is more than likely that over the term of the policy you will pay more than someone who has chosen a guaranteed premium from the outset.
You cannot change the type of premium you have once the policy has started and the only way to do this is by applying for a new policy which of course has no guarantee of you being accepted and quite possibly the rates will have gone up naturally since you took out your first policy so may not end up cheaper overall.
Next let’s look at the sum assured with whole of life policies.
Generally whole of life policies have a minimum sum assured but this is quiet low and generally about £2,000.
They do not have a maximum insurance amount although if people apply for a substantial sum assured the insurer will review it and make a decision whether they want to accept the risk or not.
Each policy will be determined on an individual basis so never go with what someone else has told you as there circumstances will be completely different to yours.
Now let’s have a look at the term of the whole of life policy
The term of the policy is determined by the age you were when you first took the policy out but for most you will continue to pay the premiums until death.
We will now look at why people buy whole of life insurance
Some people use the whole of life policy for inheritance tax planning which reduces or covers the amount of IHT that the estate will have to pay on your death.
Others use it for death cover and to leave their loved ones some extra to help when they are no longer there.
People also get these types of policies written in trust so it does not form part of their estate on death.
Finally let’s have a look at your premium
What affects your premiums?
Things that will affect your premium include age when you take the policy out, your currently state of health when you apply, whether you smoke or not and medical history. All of these can see your policy premium increase because the insurer feels you are a higher risk of dying younger.
For more information on whole of life policies or to use a free whole of life insurance calculator visit https://wholeoflifequotes.co.uk today.