A whole of life insurance policy is for those looking for a policy as an investment rather than merely a way of managing risk. This type of life insurance policy pays out when the policy holder dies, but crucially is not linked to the term of the mortgage. This means there will always be a payout once proof of death has been received.
Advantages
- A whole of life investment offers peace of mind knowing not only that the remaining mortgage will be paid off in the event of your death but also that your beneficiaries will be looked after long after this period.
- A whole of life investment policy written in trust to beneficiaries of your estate is a useful way to avoid inheritance tax.
- Those with term life insurance can switch to a whole of life investment policy if they take out a convertible term life insurance policy. This gives the policy holder the option to switch at any time to a whole life policy. As a result premiums for a convertible term life insurance policy will be higher.
Disadvantages
- Because the whole of life investment policy lasts beyond the term of a mortgage, premiums can be more expensive. Therefore for most people looking to secure the well-being of their beneficiaries in terms of only meeting mortgage repayment commitments, this type of policy is usually not necessary.
See also: Life Assurance & Mortgage Protection
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