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Back to Basics Blog - Whole of Life Cover

Back to Basics Blog - Whole of Life Cover

  • Protection

For the next of our "back to basics" blog, Senior Financial Adviser Alan Murray gives an overview of Whole of Life Cover....


What does Whole of Life Cover aim to do?

Whole of Life Cover aims to pay a lump sum on death or diagnosis of a defined terminal illness.

Under current tax rules neither income tax nor capital gains tax is payable on benefits paid out on a Whole of Life policy.  Tax rules can change.

Your Whole of Life policy will last until a valid claim is made as long as you carry on paying your premiums.

What is a defined terminal illness?

One where there is no known cure or the illness has progressed to the point where it can’t be cured and where in the opinion of expert medical opinion the illness will lead to the person dying within 12 months.

Who is Whole of Life Cover for?

It is designed for people who, for example,:-

Want to protect their family against the financial impact of their death;

Want to make funds available to cover an anticipated inheritance tax (IHT) liability on their estate.

Who can apply for Whole of Life Cover?

All people to be insured must be resident in the UK and aged between 18 and 84.

Who can be insured?

You can apply for cover on your own life only.  This is a single life policy;

You can apply with another person (typically your husband, wife or civil partner) for cover on both lives.  This is a joint life policy. 

How does a joint life policy work?

You can choose whether the benefit is paid out on a first death or second death basis depending on your personal circumstances and requirements.

Can I place my policy in trust?

Yes.  You can choose to place your Whole of Life policy in trust.

Your trustees will distribute the money in line with the terms of the trust usually to the people you have named as your beneficiaries.

What other choices do I have?

You can choose to pay extra if you want to:-

Inflation link your policy;

Protect your payments if you can’t work.  This known as waiver of premium.  

What is meant by inflation linking?

This means your insurance company/provider will increase the amount you are insured for each year in line with the increase in the Retail Prices Index (RPI) up to a maximum of 10%.

At the same time your payments will increase to pay for the higher level of insurance cover.

What is meant by Payment Protection?

If you choose to protect your payments and are incapacitated and continuously unable to work for more than 26 weeks due to sickness or an accident, your insurance company/provider will pay your premium for you.

This arrangement will stop when the first of the following occurs:-

You turn 67 years old;

You no longer meet the definition of incapacity that applies to you;

A death or defined terminal illness claim is paid out on your policy.  

Did you know?

You might be able to increase the amount you are insured for without having to provide evidence of your health. 

You might be able to split a joint lives policy into two single life policies if your circumstances change in the future.

You can use your Whole of Life policy to cover an Inheritance Tax liability on gifts you make either on a single life policy or a joint lives second death policy.

























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