Life Insurance Facts

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.

It is because of this (especially with short term term insurance) that people may find these policies considerably cheaper. It is because the gamble is that the policy holder might not pass away during the duration of the policy. If this happens there is no payout. With a whole of life policy the holder can be assured that they are covered no matter when the worst occurs. They are guaranteed that their life is covered no matter when they die. That is what makes it all the more expensive.

Another reason why whole of life policies usually work out dearer is that the vast majority of them accrue an investment element over time, with the added extra price tag. It is important to note at this stage that whole of life policies are not the most recommended of savings plans, so if a good investment is what you are after you would be well advised to consider an alternative.

The main reason that this type of insurance builds up an investment element is so that it can always meet the ever changing cost of the life assureds risk of dying. When you take out a life insurance contract the life insurance company has to work out the chance of you dyeing and then cost the plan accordingly. With whole of life contracts this costing exercise can be very difficult as the life company does not know what is going to happen in the distant future, with that in mind if they can build in a buffer zone by way of an investment element it should assist them with the changing costs of covering you well into the future.

Now that you know all about what whole of life insurance is, we can now look at how to make it more affordable. With the majority of whole of life policies, there are three levels of premiums which you can work from and three levels of benefits. Although these are both similar in from, some people want a good premium rate and some people prefer better benefits, so there are both types of policies available to you in order to suit these needs.

The maximum benefit premium based plan is designed to give the best sum assured for a given premium. What we get is the highest life cover for the lowest cost. It should be noted however that this is based on a 10 year timescale after which it is reassessed with either the premium increasing or the end yield decreasing. As with all good things the high end yield means that some other part of the policy will be affected, in this case the investment element, so there would be a negligible fund value.

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.

Finally there is minimum sum assured, this will without fail be the most expensive way of providing cover as it is aimed predominately at providing an investment element within the plan and pays little contribution towards the life insurance element. If this is the type of plan that you are looking for then you should definitely speak to an independent financial advisor as there are always more effective ways of investing money than doing a whole of life insurance contract in this way.

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.

And so, in order to get the cheapest whole of life insurance policy, you need to look for either the maximum cover or minimum premium plans available to you. Although these plans will give you the best cover for the least possible premium for a while, you must remember that this will not go on forever as you will have to pay the rest at some stage. Nevertheless, it is indeed a good way of getting some whole of life cover for a time at a more affordable price.