UK whole life insurance is a valuable and popular life cover plan that provides a lifetime of financial protection to your family in the event of your death. With this permanent life insurance UK policy, you will remain covered for as long as you are paying the premiums. Another benefit of whole life insurance UK is that one can build cash value over time.
Whatever interest you earn on this insurance policy is exempt from tax. Just as you are not required to pay taxes on the growing cash value, your beneficiary will also not have to pay income tax on the benefit that s/he receives. If case you decide to cash in the policy and you receive more than you had invested, you would need to pay income tax only on the additional amount.
UK Whole Life Insurance: Premium Basics
Since UK whole life insurance guarantees payment to your dependents following your death, it is costlier than the term insurance policy, which covers you only for a specific period. The premiums paid on permanent life insurance are usually invested by an insurer into a life fund, from where it pays out the benefit amount to family members when a policyholder dies.
Under whole life insurance, the premium depends on the sum insured, the age of a policyholder, his/her gender and whether s/he smokes or not. Anyone who has not smoked for a minimum of twelve months is considered a non smoker. The premium is generally lower for women as, on average, they tend to live longer than men.
UK Whole Life Insurance: Types of Cover
Whole life insurance has two types of cover:
Maximum cover: In this, the initial premium and the insured sum remain the same for the first ten years of the policy. After this initial period, the insurer reviews the plan based on your health status. The review might result in an increase in the premium amount.
Balanced cover: Through this policy, one can maintain the original premium through life. This cover aims to support the life insurance cover with adequate investment. The whole concept is based on the assumption that the value of units invested in the underlying fund would grow at a specific rate every year. If the fund underperforms, the premium could become inadequate and may have to be raised to maintain the insurance cover.