As the name suggests, this type of insurance provides cover for the duration of your life, rather than for a fixed term. This means that, whenever you die, your loved ones will receive a cash sum no matter what happens.
Examples of the benefits of a Whole of Life policy are:
- Provide a guaranteed lump-sum to help fund funeral costs
- Leave a guaranteed lump-sum for loved ones
- To contribute towards Inheritance Tax
Both the monthly premiums and the cover amount can be fixed so that you know exactly how much you will pay for the duration of the policy and also how much your loved ones will receive in the event of the claim.
You also have the option to increase your cover amount in line with inflation – however your monthly premiums will naturally be increased as a result. Our friendly Advisers are experts, able to answer any question you have and also make recommendations. For free impartial advice and tailored quotes call us now on 0800 988 36 37, or if you’re busy request a call back. We’d love to help you.
Case Study – provisioning for an Inheritance Tax bill
Benjamin Franklin said “In this world nothing can be said to be certain, except death and taxes.” This is exactly where a Whole of Life policy can be helpful – as a cost effective way of paying a future Inheritance Tax bill when you pass away.
As the reader, YOU can assume the role of Mr & Mrs Vita.
Fact: upon death, Inheritance Tax (IHT) is paid on any part of your estate that exceeds the ‘nil-rate band’ – which is currently £325,000 (£650,000 for couples). The rate of IHT is 40%.
Mr & Mrs Vita are both aged 60 and have a house, cash, savings, investment plus a small mortgage balance left on their property. All told, their Estate is currently worth £850,000. When the remaining partner passes away, then their beneficiaries would have to pay 40% on the amount over the nil-rate band, which means an IHT bill of £80,000 – a large sum indeed!
To prevent their two children from having to find the cash and foot the bill, Mr & Mrs Vita decide to take out a ‘Whole of Life’ policy that will pay out the required £80,000 when they have both passed away. The policy costs them £92.09 per month.
The Office of National Statistics states life expectancy for a male is 78 and for a female 82. Let’s assume Mr & Mrs Vita defy the stats and live to age 90. At this stage they would have paid £33,152 – but yet the insurer will pay the insured sum of £80,000.
In fact, Mr & Mrs Vita would have had to live until age 133 in order to have paid in more in premiums than the policy would actually pay out.
The policy is written in Trust, meaning that the proceeds don’t add to the IHT bill, nor are they held up in Probate, so the money can be paid directly from the insurer to the named beneficiaries, quickly.
This policy isn’t about generating a profit, but based on the amount of money you are likely to pay the insurer and the amount the insurer will pay out, the proposed Whole of Life Cover policy is, in our opinion, fantastic value!