In the fourth of a series of articles about choosing the right life insurance, it is considered whether the right cover for you could be whole of life insurance in Essex.

A whole of life insurance policy is designed to give you a specified amount of cover for the whole of your life and
pays out when you die. In view of the fact that it is guaranteed that you will die at some point, these policies are
more expensive than term insurance policies which only pay out if you die within a certain time frame.

Consequently, these kinds of policies can be a useful way to cover a future Inheritance Tax bill. If you think your estate will have to pay Inheritance Tax when you die, you could set up a whole of life insurance policy to cover the tax due so more is then passed to your beneficiaries.

However, to ensure the proceeds of the whole of life insurance policy are not included in your estate though, it is vital for the policy to be written in an appropriate trust. Therefore, since this is a very complicated area of estate planning meaning that you should obtain professional advice, this kind of policy has a double benefit: not only are the proceeds of the policy outside your estate for Inheritance Tax purposes. Nevertheless, the premium paid for the policy will reduce the value of your estate while you are alive, further reducing your estate’s potential future Inheritance Tax bill.

There are different types of whole of life insurance policy: some offer a set payout from the outset, others are linked to investments, and the payout will depend on performance. For example, investment-linked policies are either unit-linked policies, linked to funds or with-profits policies which offer bonuses. In addition, some whole of life policies require that premiums are paid all the way up to your death whilst others become paid-up at a certain age and waive premiums from that point onward.

Furthermore, other policies of whole of life insurance in Essex (but not all) have an investment element and a surrender value. If, however, you cancel the policy and cash it in, you will lose your cover. Where there is an investment element, your premiums are usually reviewed after ten years and then every five years.

Policies of whole of life insurance in Essex are also available without an investment element and with guaranteed or investment-linked premiums from some providers.

There is also a need to note the fact that level of protection selected will normally be guaranteed for the first ten
years, at which point it will be reviewed to see how much protection can be provided in the future. If the review
shows that the same level of protection can be carried on, it will be guaranteed to the next review date.

In the event that the review reveals that the same level of protection cannot continue, you will have two choices:

• Increase your payments
• Keep your payments the same and reduce your level of protection

It should also be recognised that maximum cover offers a high initial level of cover for a lower premium until the
first plan review, which is normally after ten years. The low premium is achieved because very little of your premium is kept back for investment, as most of it is used to pay for the life insurance. After a review, you may have to increase your premiums significantly to keep the same level of cover, as this depends on how well the cash in the investment reserve (underlying fund) has performed.

Finally, standard cover balances the level of life insurance with adequate investment to support the policy in later years. This maintains the original premium throughout the life of the policy. However, it relies on the value of units
invested in the underlying fund growing at a certain level each year. Increased charges or poor performance of the fund could mean you will have to increase your monthly premium to keep the same level of cover.

For more information about the value of whole of life insurance in Essex as a means of protecting your family’s best interests, contact our dedicated Essex-based staff at Andrew Douglas Wills and Legal Services now via www.andrewdouglaswills.co.uk or on:

01376 348 997

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