Whole life insurance: three reasons why
Many life insurance policies taken out in the UK are term assurance policies – ie, they provide life cover for a fixed length of time. But there is a place for whole life insurance policies in many people’s financial planning.
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What is whole life insurance?
Whole life (or “whole of life”) insurance policies provide an amount of life cover for – and there’s no jargon here – the whole of the policyholder’s life.
Death is inevitable for all of us, and a whole life insurance plan will pay out a lump sum whenever you die. Whole life insurance premiums are inevitably more expensive than with other policies because of the certainty of the pay-out – unlike a policy insuring against something like fire damage, which may never occur.
When not to choose whole life insurance
Because of the higher premiums, whole life insurance isn’t usually the best option for providing a financial safeguard for a period that has a definite end-date.
The most obvious example here is the paying-off of a mortgage. Why would you agree to pay higher premiums indefinitely when you could pay lower premiums for just the period you’ll be repaying the loan?
Similarly, taking out a policy to fund your children’s university costs in the event of your death needn’t carry on past their assumed graduation dates.
When to choose whole life insurance
Here are three reasons when to choose a whole life insurance policy.
- To pay for funeral expenses: you could fund this with savings – but that would reduce the amount you leave for your family. Whole life insurance can provide a cost-effective alternative. Either option means your family avoid having to meet the costs.
- To maintain your family’s standard of living: particularly if you have children, but even if they have left home you may wish to provide financial support for your partner. Whole of life policies usually pay out a lump sum, which not everyone will know how to invest most suitably – so it’s often wise to discuss how this lump sum should be handled.
- To cover an Inheritance Tax bill: if your estate is liable for IHT, as inheritance tax is often known, then the tax bill must be settled before the estate can be passed on to your beneficiaries. Using a whole life insurance policy to cover this bill can mean a faster, smoother probate period for your family.
Whole life insurance: talk to an expert
If you are unsure whether a whole life insurance or term assurance product is right for you, then it may help to talk to an expert.
Jump Money is a specialist in critical illness and life insurance cover and is happy to answer any questions you may have related to life insurance, life assurance, term assurance and life cover. The company will strive to fit an insurance package to the exact criteria you need in order to help you avoid buying products you do not need as well as helping you fully understand your purchase.
To find out more about how Jump Money can help you protect yourself and your belongings call now on 0845 8516262 or fill in an online quote form today.
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