Whole of life insurance is very similar to another type of life insurance known as term insurance or term assurance, in that, if the life assured dies it pays out the benefit to their estate. That said, that is were the similarity ends, because whole life insurance runs for the whole of the life assureds life whereas term insurance, by the definition term, only runs for a specified period of time.
Because of this fundamental difference, term insurance, and in particular short term insurance, normally works out a whole lot cheaper than its whole of life cousin. This is due to the policy being set within a time frame, so there is a chance that the insured party will outlive the policy and therefore will receive no payout. By contrast, whole of life policies are guaranteed to pay out on death, and as death is inevitable, there is no chance of a non-payout so these policies are more expensive.
Another reason whole life insurance can be dearer is the fact that a lot of plans, though not all, do build up an investment element and again this is not without cost. Now at this point it is worth pointing out that whole of life insurance is not a very effective savings plan so if you are ever looking for a good investment whole of life insurance is probably not the right product for you.
Whole of life insurance policies include this investment quotient as a way of covering the growing costs of insuring against the death of the person insured. To clarify this, when you take out a life insurance policy, the insurance company has to start off by working out the chance of you dying and when that might happen and then calculate the policy accordingly. This is difficult with whole of life, as the insurance company has no idea of when you may die and therefore no idea of the length of the insurance policy. Because they cannot see into the future, the investment part can be added in for them in order to cover the costs of the chance that you may live for longer than they predicted.
Now this is all understood I can now get into the important bit of telling you how you can make it cheaper. Again with a lot of whole life contracts there are three levels on which you can quote the plan based on premiums and another three based on benefit. They are essentially the same but owing to the fact that some people want a specific premium level and some people want a specific sum assured they have set the plans up in this way.
Let us first look at premium based maximum benefit plans. The quote is basically formulated with the goal of producing the best benefit based on a particular premium payment. Therefore you will be receiving the best benefit possible for the lowest possible premium. However, this sort of plan is only available for 10 years, after which the plan is subject to review. This will result in either the premium going up or the sum assured going down, depending on the review. The investment element usually suffers a bit with this sort of plan, so do not expect a great return for your investment here.
The next plan we will discuss is standard cover. Standard cover plans will formulate a quote which will hold true for the life of the contract. This is the best sort of whole of life insurance as it is the best formulated quote for the long term. This is because the life insurance broker is giving you their quote based on what they think it will cost to provide you cover for the rest of your life, so the quote is fixed.
Last of all is minimum sum assured, and due to the fact that it is based around investment within the plan, whilst paying little attention to the life insurance aspect, will undoubtedly be the most expensive option to pursue. Now of this is the sort of plan that interests you then my advice would be to seek the experience of an independent financial adviser, if for no other reason than that he will be able to guide you towards far better investment options.
So for a standard premium there is standard cover, for maximum premium there is minimum cover, and, it goes without saying, for minimum premium there is maximum cover. What is important is that no matter what sort of policy or cover you think you would like, always consult an independent financial adviser before making that final decision. His professional experience will be better suited to advising on a policy that will apply to your individual situation and needs, both now and in the future.
In conclusion, then, by opting for either maximum cover or minimum premium when going for whole of life insurance, there are definitely savings to be made. But you should keep in mind that the true cost will need to be met at some time during the span of your whole of life insurance policy. That said this is still a good way of at least getting some form of life insurance cover at a rate that is affordable to you now. It will at least give you some form of reassurance and comfort for what will lie ahead in your future. - 15275
Because of this fundamental difference, term insurance, and in particular short term insurance, normally works out a whole lot cheaper than its whole of life cousin. This is due to the policy being set within a time frame, so there is a chance that the insured party will outlive the policy and therefore will receive no payout. By contrast, whole of life policies are guaranteed to pay out on death, and as death is inevitable, there is no chance of a non-payout so these policies are more expensive.
Another reason whole life insurance can be dearer is the fact that a lot of plans, though not all, do build up an investment element and again this is not without cost. Now at this point it is worth pointing out that whole of life insurance is not a very effective savings plan so if you are ever looking for a good investment whole of life insurance is probably not the right product for you.
Whole of life insurance policies include this investment quotient as a way of covering the growing costs of insuring against the death of the person insured. To clarify this, when you take out a life insurance policy, the insurance company has to start off by working out the chance of you dying and when that might happen and then calculate the policy accordingly. This is difficult with whole of life, as the insurance company has no idea of when you may die and therefore no idea of the length of the insurance policy. Because they cannot see into the future, the investment part can be added in for them in order to cover the costs of the chance that you may live for longer than they predicted.
Now this is all understood I can now get into the important bit of telling you how you can make it cheaper. Again with a lot of whole life contracts there are three levels on which you can quote the plan based on premiums and another three based on benefit. They are essentially the same but owing to the fact that some people want a specific premium level and some people want a specific sum assured they have set the plans up in this way.
Let us first look at premium based maximum benefit plans. The quote is basically formulated with the goal of producing the best benefit based on a particular premium payment. Therefore you will be receiving the best benefit possible for the lowest possible premium. However, this sort of plan is only available for 10 years, after which the plan is subject to review. This will result in either the premium going up or the sum assured going down, depending on the review. The investment element usually suffers a bit with this sort of plan, so do not expect a great return for your investment here.
The next plan we will discuss is standard cover. Standard cover plans will formulate a quote which will hold true for the life of the contract. This is the best sort of whole of life insurance as it is the best formulated quote for the long term. This is because the life insurance broker is giving you their quote based on what they think it will cost to provide you cover for the rest of your life, so the quote is fixed.
Last of all is minimum sum assured, and due to the fact that it is based around investment within the plan, whilst paying little attention to the life insurance aspect, will undoubtedly be the most expensive option to pursue. Now of this is the sort of plan that interests you then my advice would be to seek the experience of an independent financial adviser, if for no other reason than that he will be able to guide you towards far better investment options.
So for a standard premium there is standard cover, for maximum premium there is minimum cover, and, it goes without saying, for minimum premium there is maximum cover. What is important is that no matter what sort of policy or cover you think you would like, always consult an independent financial adviser before making that final decision. His professional experience will be better suited to advising on a policy that will apply to your individual situation and needs, both now and in the future.
In conclusion, then, by opting for either maximum cover or minimum premium when going for whole of life insurance, there are definitely savings to be made. But you should keep in mind that the true cost will need to be met at some time during the span of your whole of life insurance policy. That said this is still a good way of at least getting some form of life insurance cover at a rate that is affordable to you now. It will at least give you some form of reassurance and comfort for what will lie ahead in your future. - 15275
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