When is whole-of-life cover useful?
- It is useful where you have long-term dependents, such as a sick or disabled son, daughter or spouse, who will outlive you
- It can be a useful way to pay for funeral expenses or inheritance tax
- If you have a large amount of assets that you wish to protect against inheritance tax
There are two types of whole-of-life cover:
Guaranteed – you pay the same annual premium from the time you take out the policy until your death and the pay-out will be the fixed sum you agreed at the beginning.
Reviewable – you may adjust your premiums at intervals and this will be reflected in the final pay out. Part of your premium is invested in index-linked funds, the idea being that it earns interest which will either act as a buffer fund into which the life assurer can dip as you get older before it needs to increase your premium. Should you cancel the policy, its value will be paid out to you. A word of warning – with a reviewable policy, your premiums will increase as you get older. Some people find the increases are not affordable. If you stop paying into the policy, or pay less, your cover may be drastically reduced. There may come a point where you decide you don’t need it anymore – say in the case where you have no dependents – at which point you might consider converting it to a straightforward savings account. If you have a reviewable or