Date Published: 12/02/2020 16:00
Some people object to insurance because there’s no guarantee that it will provide any tangible benefits: a policy only pays out if the event occurs that it’s designed to protect against. If your house doesn’t suffer fire, flood, subsidence or other damage, your house insurance won’t pay out, for example.
Of course, many policies provide peace of mind and reassurance, which surely has some value. And there is one type of insurance guaranteed to pay out: whole of life protection. This runs for your whole life; and as death is unavoidable, it will pay something sooner or later.
This provides you with the peace of mind that your family won’t suffer financial stress due to your death, whenever it occurs. You can also combine whole of life with term assurance to cover particular debts. It can also be used as part of estate planning by providing money that can help with Inheritance Tax bills. It can even have value for businesses: when used as so-called key person cover, it can protect a company from the financial consequences of losing a vital employee, partner or director.
Whole of life protection comes in various forms, but there are two main types of cover: maximum and balanced cover. With maximum cover, the initial premiums and the sum insured don’t change for the first 10 years. Thereafter, the premiums may go up depending on various factors – such as the performance of the life fund in which the premiums are invested.
Balanced cover plans aim to keep the original premium level for however long the policy runs for. However, premiums still might rise if the fund doesn’t perform as well as anticipated, or if charges go up.
So how much does whole of life cover cost? The premium rate depends on your age, how much cover you want, your sex, whether you’re a smoker, and your state of health at outset. However, because whole of life cover is guaranteed to pay out eventually, it will tend to be more expensive than term cover which might not pay out anything.
You can bolt on some extras to increase your security. One of these is critical illness cover. While life assurance only pays out on your death, critical illness plans pay their sum assured following diagnosis of a specified serious illness and the money can be used however you want. Waiver of premium might also be worth considering. This will pay your premiums for you for a set period if you’re unable to work due to illness or accident.
As always, it’s worth discussing your circumstances with a trained and qualified financial adviser to make sure you buy the plan that best suits your needs. If you need help with insurances, get in touch.
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