'Whole of life' policies are generally offered by most insurance companies. These policies guarantee to pay the sum assured on the death of the insured person, whenever that happens.
Premiums are more expensive for whole of life cover as the insurance is not limited to a certain amount of time, unlike term insurance. Additionally, when you reach a specified age say 70 or 80 you may not have any further premiums to pay but your cover will continue.
Whole of life policies are investment based. The monthly premium that the policyholders pays, buys units in an investment fund. The insurance company then cash in some of these units every month to pay for guaranteed life cover. Depending on the level of cover you require will determine how many units are cashed in.
There is a range of cover options, from minimum to maximum cover. If, for example you go for minimum cover, the deduction made to pay for your life cover will be low and more of your premiums will be used to build an investment fund.
The deduction, to pay for life cover, will be much larger if you choose maximum cover. This will leave little of your premium to be invested. After 5 or 10 years, premiums will rise so cover can be maintained, or the cover will be reduced so premiums will not have to rise.
Providing the underlying investment fund performs satisfactorily, your premiums should remain the same with standard cover.
Another option is with profits whole of life policies. Guaranteeing to pay a minimum amount of life cover if you die, this sum is increased each year by the addition of annual bonuses.
Once these bonuses are added, they permanently increase the sum assured. Upon your death a further terminal bonus will usually be paid and thus increasing the life insurance payout further. However, these policies have an investment value that tends to be low in the early years.
Also available are universal policies. They work the same as a unit linked whole of life policy. Units are cashed in every month to pay for the life cover but the policies offer a wider range of benefits.
One of the benefits is a waiver of premium; if you are unable to work your premium will still get paid. Disability benefit allows for the sum assured to be paid if you become permanently disabled.
Fatal accident benefit and critical illness cover are other benefits. Fatal accident benefit pays an amount over and above the sum assured if you die an accidental death. Such a universal policy provides a large range of all important protection insurance needs. This means premiums may be high and is a non starter as a savings vehicle. When taking out policies of any type always take care. Always read the small print and take time to make sure you are clear of all the facts.
Due to there being so many different plans who may want to speak to an independent broker. Just go on line to find one, they will have all the up to date information that you need and have the widest knowledge of all the different types of insurance needed. They will source the best one for you at the best price.
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