Whole-Of-Life Insurance

The amount of life insurance cover you need depends on your personal circumstances. If you have no children, no spouse or partner, and no debt, you may not need a huge payout and would rather focus on covering funeral costs and other debts. If you already have insurance through your place of work (e.g. a death-in-service insurance), it could be sufficient cover for you, especially if you are child-free, single and have no debts.

Before deciding on the whole of life cover amount you'll need, look at factors including:

• the amount of mortgage you still owe;

• any other debt you have that your loved ones may want to pay off;

• your family's financial security and stability;

• the number of people you want to protect financially after your passing;

• the cost of funeral expenses;

• the size of the nest egg you may want to leave for your loved ones.

You want your eventual payout to provide financial protection and stability after you're gone and that your life insurance covers the most pressing expenses for your family.

Whole of life insurance payouts aren't exactly tax-free in the UK. A whole of life insurance policy isn't subject to capital gains tax or income tax, but if your estate is worth over £325,000, there is an inheritance tax bill charged at 40% for any assets over the threshold. This can have a big impact on the lump sum payout your loved ones will receive. If you don't want your beneficiaries to pay inheritance tax, you can write your policy into a trust. It's important to speak to an advisor about your goals before making a decision.

While you can take out cover at any stage of your life, remember that you tend to pay more for your premiums the older you are. Your life insurance cost can go up dramatically if you are over the age of 50, but you can still find a good life policy if you work with the right broker. 

Whether or not you can cash in your whole of life cover early depends entirely on your individual policy, so it's important to check the terms and conditions of your cover. Some policies allow you to take out a cash payout, but the surrender value may be significantly less than the amount you've paid in premiums over the years. There may also be additional charges to contend with, including exit penalties or administrative fees. Others may not permit cashing out early at all, so make sure that you study your policy carefully before entering into an agreement.

You can take out a joint whole of life insurance policy with a partner or friend, but your life cover will only pay out half when the first person passes away. The other half will be paid when the second person passes away. A joint whole life insurance policy is usually cheaper, but it can affect the surviving partner's ability to take out another policy later in life. You should also consider what will happen to the life policy if you and your partner separate or fall out as it may not be transferable or separable.

Some policyholders are less concerned about leaving behind funds for their family when they pass away but want a steady source of income while they are still living. In that case, a pension fund is a good option. Pension funds are long-term savings plans that allow you to set aside funds for your retirement. You can take out your pension from age 55 and 25% can be taken out as a cash sum.

If you are concerned about paying for treatment if you start suffering from ill health, you may want to consider acquiring health insurance. Health insurance covers your treatment costs (such as urgent surgery or a private hospital stay), whereas life insurance provides for your family if you pass away during the policy term. Depending on your lifestyle and personal circumstances, it’s a good idea to have both life and health insurance.