Cover with no finish line
Term insurance protects you through a stretch of years, then stops. Whole of life cover keeps going. Provided the premiums are paid, the insurer will pay out at some point, whether you die next year or at a great age.
That certainty is what you pay for. The insurer knows a claim will come, so the premium is higher than a term policy with the same sum. In return, you know your family will receive the money, which makes this cover a planning tool more than a safety net for the working years.
What people use it for
Inheritance tax is the most common reason. If your estate is likely to face a bill, a whole of life policy written in trust can give your beneficiaries a sum to pay it, so they do not have to sell a house or other assets in a hurry. Couples often choose a joint policy that pays on the second death, since that is usually when the bill arises.
Others want to leave a set gift to children or grandchildren, or to make sure their funeral and final costs are covered without touching savings. Some use it to give a dependent relative long-term support.
- Funding an expected inheritance tax bill
- Leaving a guaranteed legacy
- Covering funeral and estate costs
- Providing for a dependent adult child
Guaranteed or reviewable premiums
With guaranteed premiums, the cost and the sum are fixed for life when you start. With reviewable premiums, the insurer checks the policy at set points and may raise the premium or reduce the cover to keep it sustainable. Reviewable plans start cheaper but carry uncertainty, which matters most later in life when budgets are tighter.
Some policies stop collecting premiums at a set advanced age while the cover carries on. Others ask you to pay for life. Check which applies, because over a long life the total paid can be large.
Why the trust matters here
If a whole of life policy is not in trust, the payout usually joins your estate. That can add to the inheritance tax bill the policy was meant to help pay, and the money may wait for probate. A suitable trust usually keeps the payout outside your estate and lets the trustees claim promptly. For larger estates, it is wise to involve a solicitor or tax adviser in the wider plan.
How Hi Tomorrow helps
We start by asking what the money is for, then check whether whole of life is the right tool or whether a long term policy would meet the need for less. Where whole of life fits, we compare guaranteed and reviewable options from the insurers on our panel and show the long-run cost.
We help with the medical questions and the trust paperwork, and we can work with your solicitor or accountant if inheritance tax planning is part of the picture.