Reviewing your protection insurance? Why whole of life insurance could be better than term assurance

14th April 2014 by The Harried House Hunter

Many of us are living longer and working harder than ever before. Some of us may even be accumulating more wealth than ever before too.

The consequence of this however is that declining health as we get older can be unavoidable and can result in significant financial issues: rising care costs, our families being taxed on the homes and estates we leave behind, and the legacies we worked hard to build through our lives being eroded due to inflation, and of course life and health insurance becomes much harder to obtain once a few health issues already exist.

Because it is simple, widely available and low cost many people buy term assurance – plain and simple life cover that pays a fixed amount should you pass away within a set number of years.

However, whole of life assurance lasts throughout your life so that dependants are assured of a pay-out whenever you die.

Historically, whole of life plans were only offered as part of estate planning for high net worth clients even though this type of plan protects beyond the life of a debt, mortgage or the dependency of children.

In the past the criticism of these plans was that there was often a sting in the tail of the policy caused by periodic reviews by the insurer, typically after ten years, that could see the premium vastly increase or the sum assured shrink.

Known as guaranteed whole of life, these reinvigorated products offer a guaranteed pay-out on death and, in many cases, fixed underlying premiums meaning the policyholder faces no unpleasant price hikes or other surprises as the policy progresses.

A whole of life plan taken on early enough won’t fund the cost of care, but it will replace the legacy (property, life savings) used to fund those care costs, thus ensuring that your family has an inheritance to receive after your passing.

Whole of life cover can supplement term plans for families by providing open ended cover that adapts to our changing lifestyles in a way that term plans cannot match.

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