Whole of life
Whole of Life Policies
A whole of life policy is another policy which does exactly as it says. It covers you for the whole of your life. When the inevitable happens, providing the policy is still in force, it will pay out a death benefit. Although they can provide a surrender value, they should not be used for investment purposes due to the deductions made for the death benefit.
As payment of the benefit is inevitable Whole of Life policies tend to be more expensive than Term Assurance policies for the same level of cover (it depends on what age you are when you start the plan). Each premium is made up of a mortality element and a savings element. Upon death, a fixed sum is paid to the beneficiary along with the balance of the savings element. The performance of the underlying investment fund for Whole of Life Plans is important, as the cost of future premiums depends on fund performance.
These policies come in various forms:
If you are worried about investment risk and increasing premiums, there are Whole of Life policies available which do not rely on fund performance, however, these do not acquire a surrender value. Please be aware that in some cases this type of assurance is based on an assessment of the health of the applicant.